Policy Statement 016 Issued by Independent Media and Policy Initiative (IMPI)

Cost of living protest and Tinubunomics: Interrogating President Tinubu’s response

Abuja, Aug. 22, 2024 – More than a week after the protest tagged “Days of Rage” subsided, we have continued to observe that the underlying sentiments that precipitated the August 1-10 public demonstration against the high cost of living, which turned unruly and fatal, still linger in different quarters of the polity.  

As a baseline for our intervention, we note the idiosyncrasy that underscored the incoherent and confusing demands advanced by the protest’s coordinating leadership. 

Our immediate conclusion is that the rationale for the protest is rooted in a determination to disrupt governance and register grievances publicly. We deemed this as tolerable conduct, which is within the bounds of citizen’s rights.

We, however, note that the violent turnout of the protest after being investigated was masterminded by fifth columnists who deliberately incited some protesters to serve a predetermined selfish, disruptive end.  

Additionally, we gripe at the body of demands made by the protesters because it lacked a middle-ground framework that can accommodate negotiations that will relax the policies that they claimed were responsible for the increased cost of living, as reflected in prices of foodstuffs and other household items. Indeed, prices had gone haywire at the time, as reflected in high food prices reaching 40.8 per cent in June 2024 and the headline inflation rate shooting to a high 34.2 per cent, a cumulative of 19 months of increasing inflation rates.  

 Naturally, President Bola Tinubu’s economic policies were held guilty by the protesters for turning the country into a space they described as a state of “economic anathema”.

To assuage their (protesters) angst against the government of President Tinubu, the protesters insisted on reversing the removal of fuel subsidies and harmonising multiple foreign exchange windows.

These, incidentally, were the chief twin policies deployed by the federal government to stabilise the national economy soon after the president was sworn in on May 29, 2023.   

 Now, from where we stand, this administration has been in power for about 15 months. Therefore, we do not subscribe to the protesters’ demand to condemn the government’s chief twin policies.  

We consider the policies and other auxiliary ones conceived and deployed taken together as capable of changing the Nigerian economic paradigm, even as we observe that those elements that exploited the protest to amplify their violent political agenda are still waiting on the sidelines to unleash another session of violence.  

This is especially true as there are grumblings over the President’s refusal to directly reverse himself on the specifics of fuel subsidy and the like in his broadcast to address the protesters and Nigerians on 4 August 2024. 

 In the context of the protest that unleashed resistance to the policies being implemented by the President Tinubu administration, we hereby assert that history is undeniably replete with numerous cases of leaders of governments across the world who were driven by passion and extraordinary vision to conceive and implement policies that may initially look out of place but end up being positively impactful.  

But often, these leaders are considered non-performing by opposition figures who obdurately insist on sustaining the status-quo despite the obvious reality that the policies may not necessarily be working for the good of society.  

To illustrate this, we recall the vicious attack on the economic policies adopted and implemented by President Ronald Reagan’s administration in the United States of America between 1981 and 1989. Opposition figures described Reagan’s policies as voodoo economic policies.  

However, the Reagan years were later described as prosperous years, with interest rates, inflation rates, and unemployment falling faster than they did immediately before or after his presidency.  

 In the same vein, we also recall Mrs. Margaret Thatcher’s place in the making of modern Britain.

After winning the 1979 general election, Thatcher became the British prime minister and introduced a series of economic policies intended to reverse high inflation, which later paid off.

But Britain struggled against those measures in what was described as the ‘Winter of Discontent.’

Her political philosophy and economic policies emphasised greater individual liberty and the privatisation of state-owned companies while reducing the power and influence of trade unions.  

Supporters fondly labelled her economic and political preferences as Thatcherism. Today, major political parties in Britain accept trade union legislation, privatisation, and a general free-market approach to government.

Yet her critics, while in government, vociferously claimed that her administration’s successes were obtained only at the expense of great social cost to the British population.   

In our consideration, the August 1-10, 2024, protest is evidence of the usual intolerance to new thinking and innovative policy-change implementation experienced by the countries’ leaders highlighted above.  

In this regard, we acknowledge the substance of the speech of the President in response to the protest as a proactive communication effort to appease not only the protesters but also the larger Nigerian populace and to avail an understanding and appreciation of the government’s policies.  

 While acknowledging the umbrage some protest leaders took against the presidential speech, we dare submit that it captured the essence of the economic paradigm shift the administration is currently engineering.  

 More importantly, the speech speaks to the vigorous perception of motion rather than a progression of movement that has characterised the national economy since oil became the main staple in the early 1970s. 

 We agree with the President’s submission in that speech, in which he noted: “For decades, our economy has remained anemic and taken a dip because of many misalignments that have stunted our growth.

Just over a year ago, our dear country, Nigeria, reached a point where we could not afford to continue using temporary solutions to solve long-term problems for the sake of now and our unborn generations.

I, therefore, took the painful yet necessary decision to remove fuel subsidies and abolish multiple foreign exchange systems that had constituted a noose around the economic jugular of our nation and impeded our economic development and progress.” 

 In truth, the country has adopted a limited and linear economic framework over the years with little wriggle room when the government’s official liquidity flow could be more precise.

Policies such as removing fuel subsidies and abolishing multiple foreign exchange systems immediately impact transportation and related costs across markets, which reflect heavily on end users’ retail prices, as witnessed since June 2023.  

But, as the President noted: “On the fiscal side, aggregate government revenues have more than doubled, hitting over N9.1trillion in the first half of 2024 compared to the first half of 2023 due to our efforts at blocking leakages.”  

 We verified this claim and found it to be true. The N9.1 trillion generated in the first half of 2024 compared strongly to the total N4.06 trillion revenue in the same period in 2023.

This more than doubled the total national retained earnings in 2023, which had huge consequences for the quantum of revenue available for sharing among the three tiers of government. 

 It will appear that the President has turned the fiscal space into an orbit of positive activism, counting, among others, the remarkable reduction of the national debt in dollar terms from $108.2 billion in December 2023 to $91.4 billion in March 2024.

That, for us, is a remarkable feat recorded on the back of the removal of fuel subsidies and reinforced by a more disciplined approach to fiscal management. What this says about the country is that Nigeria is no longer a debt-accumulating nation.  

In that speech, the president also observed that “Productivity is gradually increasing in the non-oil sector, reaching new levels and taking advantage of the opportunities in the current economic ambience.”  

Indeed, by our estimation, this submission captures the evolving productive energy in the nation’s non-oil sector.

That sector is contributing, for the first time since 1972, a significant percentage to the national economy. At the last count, the non-oil sector accounted for $55 Billion of trade in 2023.

This figure is verified by the N6.2 trillion trade surplus recorded in the first quarter of 2024, affirming an increase in exports, a segment of international trade that had always returned low figures to the country’s purse. 

 However, since the coming of the Tinubu administration, we can assert with some form of empirical authority that Nigeria is being weaned off its single-product economy syndrome. 

 We also note the impressive percentage reduction in the nation’s total revenue for servicing debts.

The President’s revelation of the reduction of revenue used in servicing national debt from 97% to 68% over a 13-month period is not only heartwarming but also suggestive of an economy distancing itself from profligacy hallmarked by the fuel subsidy regime and multiple foreign exchange windows.  

 Again, in fundamental ways, we reasoned that the recorded revenue-to-debt service ratio reduction is a consequence of removing fuel subsidies and more dollar inflow into the economy.

This was reflected in the $24 billion foreign exchange inflow in the first half of 2024, which compared positively with the $7.29 billion inflow in the first half of 2023. 

 Deriving from the above, we expect a further reduction in the debt service ratio with the increase in national income and reduced national inclination to acquire more debts.

This implies the availability of more revenue to provide for the critical needs of the Nigerian people, as already exemplified in the total distributable income for the three tiers of government in the first half of 2024, which is stated at N12.45 trillion compared to the N5.2 trillion for the same period of January to June 2023.  

As the President put it, this quantum leap in revenue availability to the three tiers of government has given the country more financial freedom and room to spend more money on citizens and fund essential social services like education and healthcare.  

It has also led to the States and Local Governments receiving the highest allocations from the Federation Account in the country’s history. 

Concerning the nation’s perennial budget deficit, the President revealed that, for the first time in many years, it was reduced by 29 per cent to N2.83 trillion in the first quarter of 2024 from N3.96 trillion in the same period of 2023.  

A fiscal deficit is a shortfall in the government’s revenue compared with its expenditure.

The reduced budget deficit will engender increased capacity by the federal government to spend more on capital projects and human capital development, which are critical in spurring economic growth, delivering jobs, and reducing poverty.  

However, it should be noted that this reduced deficit was accomplished through foreign exchange gains, which were connected to the harmonisation of the multiple foreign exchange windows.  

Furthermore, we can establish a connection between increased national retained earnings and the impactful infrastructural projects the President reeled out in his address, for which he said: “We have also embarked on major infrastructure projects across the country notable among which are the Lagos-Calabar Coastal Highway and Sokoto-Badagry Highway projects which will open up 16 connecting states, creating thousands of jobs and boosting economic output through trade, tourism and cultural integration.” 

 The most impactful policy that will reduce the cost of living is the adoption of Compressed Natural Gas (CNG) as the country’s mainstream energy source.  

 As the President observed in his address: “We are a country blessed with oil and gas resources, but we met a country dependent solely on oil-based petrol, neglecting its gas resources to power the economy. We also used our hard-earned foreign exchange to pay for and subsidise its use. 

To address this, we immediately launched our Compressed Natural Gas Initiative (CNG) to power our transportation economy and reduce costs. This will save over two trillion Naira a month, being used to import PMS and AGO and free up our resources for more investment in healthcare and education.” 

 Indeed, adopting natural gas as the national alternative energy source is the outcome of conscientious thinking. Nigeria boasts a proven deposit of more than six trillion standard cubic metres of gas, which is environmentally friendly, cheap, and waiting to be commercially exploited locally.

This will help to save millions of dollars that would have been expended on importing petrol. 

Our findings establish the cheaper cost of CNG compared to Premium Motor Spirit, otherwise known as petrol.

Our independent investigation shows that 50 litres of PMS equal 30 kilograms of CNG. Whereas the average fuel economy for PMS is 10 to 15km (about 9.32 mi) per litre for a typical passenger vehicle, the average fuel economy for CNG is 20 to 25km per kilogram.   

If mathematically captured, this would be as follows: 50 litres of PMS at N650 per litre is N32,500, while 30kg of CNG at N250 will amount to N7,500, with a difference of N25,000. This is pragmatic thinking. 

As we advance, we note with interest the bouquet of ongoing implementation of programmes as highlighted by the President in his speech. These include the Consumer Credit Corporation, which is poised to disburse credits to eligible beneficiaries for the first time in the history of this country.  

 In tandem with this is the Nigeria Education Loan Fund (NELFUND), another revolutionary initiative to support education.

By our checks, we understand that more than N2.5 billion had been disbursed as loans to qualified beneficiaries out of the N150 billion take-off fund in the first three weeks of commencement of operations. 

 President Tinubu also revealed the federal government’s activation of the technology and innovation industry with $620m under the Investment in Digital and Creative Enterprises (iDICE) programme.

The programme, whose objectives include empowering young people, creating millions of IT and technical jobs and producing millions of technical talents, confirmed the forward-looking capacity of the President, who determined that the national developmental trajectory will be pivoted on technology and innovation.  

The country is already recording impressive foreign exchange earnings from software development sold abroad.  

We are particularly impressed by President Tinubu’s exposition on social housing construction, starting with 3,212 units of Renewed Hope City and Estate in Karsana. The Housing City and Estate will be replicated in all the states, with 500 housing units each, as part of a goal to build a total of 100,000 housing units over a period of three years.  

Of course, this programme will energise the construction industry, with an associated multiplier effect on the economy, just as it would facilitate home ownership.  

Meanwhile, we excitedly await the President’s promise to meet with governors and key ministers to crystallise a plan to cultivate 10 million hectares of land to grow food for the country.

For us, this is an ambitious undertaking in consideration of the historical incapacitation of State Governors to sufficiently cultivate the large store of arable land, estimated to be 85 million hectares, that the country is endowed with.  

We hope that State Governors will accept the idea of treating agriculture as an enterprise rather than just a means to feed households. 

In conclusion, we have taken President Tinubu’s speech and interrogated it in the context of the Nigerian circumstances and can, in good conscience, submit that the President has moved strategically from ruminating over a developmental agenda to actively laying the building blocks for an integrated, all-inclusive Nigerian economy.  

Moreover, we have seen the first green shoot of the policies’ implementation: the reversal in the headline and food inflation rate in July, which was stated at 33.40 per cent and 39.53 per cent, respectively, for the first time in 19 months. 

Signed  

Chief Niyi Akinsiju, F.CiFian, Chairman, Independent Media and Policy Initiative (IMPI)