World Bank and the trouble with Tinubu’s economic reforms 

Understandably, the economic reforms of the Federal Government under President Bola Tinubu have attracted mixed reactions from sections of the populace. While some feel that the government is getting it wrong, others believe that time will eventually vindicate the choice of the authorities. What is discernible from the debate is that most Nigerians need drastic measures to, in the interim, survive the current dislocation, even if they will reap wider benefits later.

At this year’s Nigeria Economic Summit, Senior Vice President of the World Bank, Indermit Gill, passed a vote of confidence on President Bola Tinubu’s initiated economic reforms but noted that Nigerians would wait for 10 to 15 years to reap their benefits. In essence, the citizens would need to bear with what the government has described as the short-term shocks of reforms for as long as 15 years.

Indeed, it pays to endure for a moment for an enduring pleasure. Except that the future is useful for those who survive today, a reason reforms should have built-in mechanisms that should cushion the short-term pains. Hence, short-term survival is an important bridge that connects today with the future as explained by one of the most memorable quotes of the British economist, John Maynard Keynes – “in the long run we are all dead.”

One cannot trade today’s existential concerns for the prosperity of a nebulous future much as no good father will ask children to continue with empty stomachs with a promise of abundant food in the days ahead. In the same manner, asking Nigerians to wait for 15 years to reap the benefits of reforms that may send many to the grave is lacking in empathy and sensibility.

Ironically, the same World Bank has given countless damned reports about Nigeria’s economic conditions in recent years. For instance, its Nigeria Development Update (NDU) disclosed that the share of Nigerians living below the national poverty line has risen from 40.1 per cent to 56 per cent since 2018 and that 129 million are now living in poverty. A key driver of the rising poverty is the unbearably high headline inflation, which has worsened following the exchange rate reform, which has wiped off about two-thirds of the value of naira. The NDU also admitted that the economic reforms, in the right direction notwithstanding, are adding “intense pressures on households and firms.”

Since the 1980s when the half-baked Structural Adjustment Programme (SAP) was adopted, currency devaluation has been nothing less than a falling knife on the Nigerian economy. With the country’s propensity to consume at nearly 100 per cent, Nigerian real income level falls sharply each time the naira depreciates against the dollar and other currencies, suggesting that the current FX crisis has put the livelihood of millions of people on the balance.

Almost 18 months since the Central Bank of Nigeria (CBN) hastily activated the pro-market reform of the foreign exchange market, the FX market crisis which is turbocharged by dollar scarcity, speculative trading and round-trip transactions, has continued. Today, it is obvious that the policy was, indeed, suicidal, which is not farfetched. Only the CBN and a few others in its club did not think it was a disaster to dream of stabilising an economy with a shallow industrial base with most companies importing up to 80 per cent of their raw materials by merely liberalising the FX market, a major strand of the Tinubu reform.

In the last few months, the CBN, which seems to have lost control over the market, has attempted to use futile liquidity support approaches to rein in the debauchery. If such interventions become obvious and overt, the Bretton Woods institutions, in their usual meddling, would begin their campaign against the country. Whatever option the authority takes now, the economy is a loser. A revert to the pegged approach means re-introducing the market rigidities that the government had sacrificed about 70 per cent of the value of the naira to remove. If we continue the liberalisation pathway, the naira may lose more as it has not demonstrated a sufficient war chest to match the dollar and other currencies.

Perhaps, it is safer to tarry on the second option just as it is also infertile to revert to a fuel subsidy regime if we are committed to building a free enterprise environment. But the government must realise that the citizens cannot be left to bear the brunt consequences of its poor policy choices all alone. If the exchange rate and fuel pass-through effects on inflation continue, workers will continue to lose their real incomes to higher prices and slip deeper into multidimensional poverty.

The chicken-and-egg debate about economic reforms and palliatives is well over with the country already neck-deep into the process of recalibrating the economy. But the government has failed to strengthen the social safety nets for close to two years travelling on this path. The same World Bank and International Monetary Fund (IMF) that advocated reforms have also supported building and strengthening social support. We cannot accept one and reject their other advisory.

In the advanced economies where pro-market economic reforms have taken root are strong in social infrastructure. In the United States, Europe and the United Kingdom – countries that have become symbols of market economies – for instance, individuals do not buy motor spirit out of necessity because there are well-developed, reliable and available subsidised public transport modes where residents pay infinitesimal portions of their earnings to commute round the clock. This is the standard a reformed Nigeria must borrow a leaf from and the building process must start now.
  
Whereas the government has regaled the citizens about the prospects of Compressed Natural Gas (CNG)-powered vehicles, what we have achieved in terms of filling station and conversion infrastructure is a joke or disappointing at best. A few weeks ago, the Nigeria Labour Congress (NLC) said the five 14-seater CNG-powered buses it took delivery of were not enough. The government must commit to changing this narrative. Nigeria cannot and must not continue to make a mockery of serious national matters and expect to secure public support to build the future country of her dreams.

Whereas the reforms are commendable and should be supported, the government must demonstrate sensibility and empathy. Suppose the citizens are required to walk five miles a day as a sacrifice to achieve the lofty objective of building a sustainable economy. In that case, those saddled with the governance should stay back to play the roles of cheerleaders.

Most importantly, they must now begin to activate all known and new social safety nets to help Nigerians cope with the hard times. This is no time for propaganda or cheap politics but serious business. No economic reforms are worth the blood of any Nigerian. All reforms must have in-built mechanisms to address the survival needs of the moment.