An economist and Chief Executive Officer, Centre for the Promotion of Private Enterprise, Dr Muda Yusuf speaks to DANIEL AYANTOYE about the performance of President Bola Tinubu
President Bola Tinubu will be one year in office on May 29, how will you assess his performance?
Performance review of one year of the current administration requires proper contextualisation. There were significant legacy issues that significantly impacted performance outcomes, especially from a macroeconomic point of view. There was a legacy of an incredibly dysfunctional foreign exchange market riddled with round-tripping and all manners of malpractices.
Secondly, there was a fuel subsidy regime which created opportunities for corruption and bleeding of the country. The state of affairs in the sector was a major disincentive to investors in the downstream oil sector. The sector became a hotbed of corruption of a huge proportion. The huge backlog of mature foreign exchange obligations was more than $7bn. This created a major liquidity crisis in the economy. There was vandalisation of oil production facilities with incredible impunity. The administration has made significant progress in restoring some sanity to the oil-producing areas, even though it is a work in progress.
How will you describe the economic impact of some of the policies and reforms introduced by the government since assumption?
The truth is that reforms take time to be prepared and executed. It could take an even longer time for the results to be felt. But my view is that the reforms will necessarily pull back the economy from the brink. Much has been achieved with fiscal consolidation. Government revenue has improved significantly following the reforms. There were also tax reform initiatives. The point to stress is that much of the first year was devoted to corrective reforms which were in many instances also painful. But the reforms were inevitable.
Will you say the policies have had any significant impact on the economy?
They have had an impact because if those policies were not introduced, the economy would have been worse off than what we have now. This is because before he took over, the Central Bank of Nigeria was practically financing the government through the Ways and Means, and that is why the Ways and Means financing got to almost N30tn by the end of that administration. This is why the fiscal space for the government was extremely very tight because we are spending almost 80 per cent of our revenue on subsidy. Not just subsidy, but even corruption is also related to the subsidy. So, the reforms that have been introduced, has helped us to improve the fiscal space. Government has more revenue and the FAAC has increased; almost tripled, and the need to borrow from the CBN has reduced.
The level of deficit is likely to go down. From a revenue or fiscal consolidation point of view, there has been a remarkable movement from where we were. Then all the challenges of the foreign exchange market and corruption in the foreign exchange market; all of those things reduced drastically. Investors now have a lot more confidence. The administration has been able to clear the backlog of maturing obligations in the foreign exchange market which was also creating a confidence crisis before the administration came. So, those things have had some good impact. But I must admit that they have also come with a lot of hardship through the high prices of commodities, the high cost of fuel, and transportation costs. Well, there is a price for everything. That is the price we have to pay at least to bring the economy back on track.
The hardship has put many into abject poverty. Why do you think it is difficult for previous and current administrations to put an end to the suffering of the people or bring it to a bearable level?
It is not easy because one of the biggest problems in poverty is inflation. Since inflation is still high, purchasing power will be weak. People will not be able to consume much. That is why it is good for the government to focus on economic stability bringing down inflation. The second thing is the issue of food insecurity. Insecurity is a major problem as far as food production is concerned because if the farmers are not producing enough, how can they sell at a cheaper rate? These are problems that the government is trying to solve and these are not things that you can solve very quickly. There is no quick fix to them.
Do you think the situation could have been better handled than this?
The administration could do better about the speed of delivering mitigating measures to ease the pains of the reforms. There is also the need to address the volatility in the foreign exchange market. Frequent swings in the exchange rate are very detrimental to business because of the uncertainty that comes with it. The CBN should also address the frequent changes in the exchange rate for import duty computation.
Subsidy removal, electricity tariff hike, and taxation are some of the policies that Nigerians have described as anti-people. What is your take on this?
My take is that the government has set up a tax reform committee. I think we should wait for the outcome of the report of that committee. One of the mandates given to the committee is to streamline the taxes so that you can put an end to the multiple taxations. Let’s see what comes out of that report. The committee has finished its assignment and they are about to present their report to the President. I am sure the outcome will address some of these issues.
Do we need electricity tariffs to increase at this time?
That is a chicken and egg situation because the electricity people are saying that they are not able to cover their costs. Therefore they are not able to invest in infrastructure and things that will ensure steady power. The citizens are complaining that the burden on them is too much. So, it is a tricky situation. That will require some government intervention to see how we can have a balance. However, the electricity company needs to invest more equity into the business because some of them don’t have that capacity, and it is also important to address the inefficiency problem in the electricity sector. At the same time, the tariff must be such that the electricity sector is sustainable.
Three years ahead for the first tenure of President Tinubu. What is the way forward?
The way forward is for us to first address this issue of cost of living. That is extremely very important because citizens are still groaning because of the high cost of living. He will have to look at bringing down the cost of living, the cost of transportation, and particularly the cost of food. We need to accelerate the process to ensure that we increase the oil output so that oil production can come close to at least 1.8 or 1.2 million barrels per day.
If we can do that, we will be able to get more foreign exchange to stablise our currency. The government needs to do more about insecurity which is a major issue to investors. We know they are doing something but they need to do a lot more. Then the Central Bank needs to do more frameworks to ensure some measure of stability in the foreign exchange market. We need to reduce the volatility in the market. Finally, we need to fix the customs duty exchange rate so that we can reduce the duty on clearing cargo at the ports.
