1. Over N1 Trillion Saved in 2 Months.
President Bola Ahmed Tinubu during his address confirmed that the Federal government has saved over N1 Trillion in the 2 months since his administration assumed office. It is assumed that this savings is from discontinuation of fuel subsidy and floating of the exchange rate. At the rate of N1 trillion every 2 months, it is expected that a further N2.5 trillion will have been saved by the end of the fiscal year 2023. It remains to be seen how the funds will be utilized as the President only announced N500 Billion in palliatives, it is still unclear how much the new minimum wage will be and consequently how much it will cost the government.
2. Is There a Silver Lining in Subsidy Removal Cloud?
The President announced, as part of intended measures aimed at easing the adverse impacts of the subsidy removal, a proposed investment of N100 Billion to acquire 3,000 units of 20-seater CNG fuelled buses between now and March 2024. The buses are to be distributed amongst major transportation companies in the states.
Nigeria is among the top 50 countries contributing to global carbon emissions, with a percentage of 0.23%, ranking fourth in Africa. Compressed Natural Gas (CNG) is a cleaner substitute for petrol. This shift towards sustainability can extend to other sectors of the economy, creating spill-over effects. For instance, reduced greenhouse gas emissions from CNG adoption can lead to long term benefits for our climate and environment.
The question remains: Could this be a pioneering move towards embracing cleaner fuel sources such as solar?
3. Food Inflation is Top of The Menu
Whilst there are several considerations in tackling inflation aggressively at this time, for example, the government needs to be fiscally expansionary to boost the economy, that said, food inflation is particularly worrisome and must be addressed immediately. President Tinubu announced a planned release of 200,000 MT of grains from the national Strategic Grain Reserve (SGR) to households across the 36 states and FCT (Former President Buhari released 40,000 MT in April 2022 in similar fashion). This is in addition to other measures aimed at boosting food production such as support to cultivate 500,000 hectares of farmland- specifically rice, maize, wheat, and cassava and 225,000 Metric tonnes of Fertilizer and seedlings.
In response to food emergencies globally, SGRs have evolved as a vital mechanism recognized by the UN Food and Agricultural Organisation, to cope with such situations. These reserves not only help stabilize grain prices but can also provide grain loans to organizations or countries.
It is however unclear that the current inventory of the Strategic Grain Reserve can meet this promise or if the government will have to procure additional grains. The last widely reported figure in August 2022 was 60,000 MT- the United Nations recommends a minimum of 3.5 million metric tonnes in the SGR.
4. Revealing Key Focus Sectors: Agriculture, Transportation and Manufacturing.
Of the N500 Billion announced in the President’s address, 40% (N200 Billion) was dedicated to Agriculture and Food production, 20% (N100 Billion) was directed at Transportation and 15% (N75 Billion) was aimed towards the Manufacturing sectors. The balance of N125 Billion is in form of credit and conditional grants to MSMEs and Nano businesses.
Over the past five years (2018-2022), the manufacturing sector contributed N32.346 Trillion to the Nigerian economy, representing 9% of the total cumulative GDP of N358.232 Trillion. This indicates a relatively weak industrial base in the country. During the same period, GDP from the Transport sector experienced a significant decrease, declining from N338 Billion in the fourth quarter of 2022 to N209 Billion in the first quarter of 2023, a reduction of nearly 40%. Additionally, the Agricultural sector contributed between 20-25% to Nigeria’s GDP between 2021-2023.
These trends highlight negative growth patterns that demand urgent attention, as these sectors play a vital role in the economy’s Revenue-to-GDP ratio. An efficient transport system enhances overall productive efficiency in the economy, while the supply of agricultural goods contributes to Nigeria’s international competitiveness in global markets. Furthermore, a robust manufacturing sector can act as a competitive substitute for imported goods, fostering a healthier balance of payments. Addressing the structural deficiencies faced by these sectors is crucial for fostering sustainable economic growth and development in the country.
5. Encouraging Partnerships with the Private Sector & State governments for implementation
The President did not announce the creation of any new parastatals, this is a welcome development. When Former President Jonathan inadvertently expanded the vocabulary of many Nigerians in 2012 by introducing them to the word ‘Palliatives’, it was to be handled under the Subsidy Re-Investment Programme (SURE-P) scheme which expanded the government through creation of an agency. It is noteworthy that President Tinubu, an ex-governor at the time was a vocal critic of the programme. Similarly, President Buhari’s administration created the Government Enterprise and Empowerment Programme (GEEP).
At this time, it appears all initiatives announced will be managed by existing government agencies in partnership with private sector participants (transport companies and banks), DFIs and state governments,
The President announced the Infrastructure Support Fund in partnership with State governments to invest in critical areas of their states with specific mention of healthcare and educational infrastructure. The fund is also supposed to bring improvements to rural access roads to ease evacuation of farm produce, this is critical to food security and affects smallholder farmers directly. Too often, FG initiatives are sub-optimal in their effectiveness due to its distance to the people; Local and State governments are much closer.
Conclusion
The President’s address was met with mixed reactions, and it did not prevent the labour unions from proceeding on a nationwide strike. While the objectives outlined appear sound, achieving optimal results hinges on addressing the factors that constrain policy realization in Nigeria. The President in his address acknowledged the influence of the “elite of the elites”, who have skewed the distribution of national income in their favour. Hence, without careful contextual considerations of policy implementation, the measures may prove ineffective- this is the sentiment echoed by the majority of Nigerians who were left unimpressed by the address, a sentiment rightly informed by past experiences. It is imperative to navigate these challenges to ensure the successful realization of the proposed initiatives for the benefit of the nation and its citizens.
