By M. Kay OLUWOLE
Simply put, we define Tinubunomics as the economic philosophy and policies enunciated by President Bola Ahmed Tinubu during his presidency of Nigeria.
Tinubunomics covers areas like Trade, Foreign policy, labor/employment, monetary and fiscal policies that guide the administration for the next four years. It is not yet fully and clearly defined, but from what we can glean from the effected policies and pronouncements, one can safely gauge the direction of the economic caravan: it is headed towards deregulation.
President Bola Tinubu in his inaugural speech on May 29, announced two major consequential decisions on May 29, among other things. The two decisions included the removal of the petrol subsidy and the plan to introduce a unified foreign exchange rate replacing the existing two windows (the investment and export, I&E, and the parallel exchange rates). Both decisions had immediate impacts on the economy. The price of petrol increased by three hundred percent and led to increase in the price of transportation and associated activities.
The petrol subsidy cost the government $10 billion last year. That was the equivalent 2.1% of the GDP. According to the Economist, the unified foreign exchange rate caused a devaluation in the value of the naira, up to 63% causing hardship for transactions that involve paying in foreign currency, including school fees abroad.
There were speculations that something would happen to the fuel subsidy in the new Tinubu administration but only few suspected that it would be totally removed and even fewer people suspected that it would be removed as early as the first day of the Tinubu administration.
The presidential inauguration speech customarily includes announcements of palatable news of intentions to follow-through with the promises made during the campaign to provide relief and hope to the electorate. Usually, presidential inaugurations are followed by a “honey moon” period during which supporters express goodwill and hope, while detractors may express criticisms of the newly inaugurated government.
Instead of President Tinubu using his inaugural speech to sell goodies and picking low-hanging fruits that will ingratiate him to the electorate, he announced the removal of the petrol (fuel) subsidy, a tough decision, giving the nation a much-needed medicine to wean it off the perennial fuel subsidy that had become a drainpipe on the economy but a conduit pipe of lucre for the well-connected and powerful elites.
Barely did the president conclude his speech, before the effects of the removed subsidy were felt in the petrol stations and the consequent sky-rocketing of the prices of food, transportation and other daily necessities. The effects were swift and harsh. The government is responding by engaging the labor leaders, state governments and other stake holders of the economy to work out reasonable palliatives to cushion the impacts of the removal of the fuel subsidy.
According to the government, the money saved by removal of the fuel subsidy will be used to fund some other national priorities like healthcare, education, infrastructure, and investment in other sectors of the economy.
The combined effects of the two policies, the removal of the petrol subsidy and the attempt to unify the foreign exchange rates have caused some hardship for most Nigerians. These hardships must have been anticipated in advance given that the price of petrol affects most things and given that the Nigerian economy is heavily import-dependent.
Given our long history of macroeconomic profligacies and the fiscal incontinence of the free-wheeling past years, the president has chosen a realistic but painful approach to the management of the economy. One hopes that the two policies are implemented as best as possible. Many economists in the country support the policies, as painful as they may be in the short-run. The administration should stay with the policies as it continues to implement ways and means to cushion the unpalatable effects. On the long-run, the country will be better off as we reap the benefits of the reforms.
Following the two decisions, the president also announced the formation of the Presidential Committee on Fiscal Policy and Tax reform to look into the best ways to improve the national taxation system including the vexing issue of double taxation. One hopes that the committee would address issues like tax avoidance, tax evasion, over taxation, under taxation, tax loopholes, etc. A transparent fiscal policy will enhance the ease of doing business and ensure a fair and equitable distribution of the tax burden that will attract foreign investment. One of the aims of an impactful tax policy should include a reasonable progressive tax policy that will encourage the reduction of inequality.
Concessionary tax rates, like tax cuts, tax holidays to foreign investors in some industries will also encourage foreign investments.
Regarding monetary policy, a unified foreign exchange rate will enhance foreign investment as it eases the repatriation of profits and earning of foreign investors.
With the president’s searchlight into the operations of the Central Bank of Nigeria, it appears that the bank would be better-positioned to achieve its traditional roles of a better management of the monetary policies, inflation and employment.
Within the first hundred days of the administration, President Tinubu has demonstrated courage and conviction by taking hard decisions with the hope that his reforms would bear fruits in due course. His constant refrain to the economy indicates it is very dear to his heart and he is doing everything possible to improve it. A growing economy will enable him fulfil his electoral promises. He should continue to go big on the economic reforms with the focus of a laser beam. A scatter-shot approach or reversal of policies for political pressure will not achieve the desired results.
A growing economy has been compared to a “rising tide that lifts all boats” since everyone benefits from an expanding economy.
The palliatives provided by the Federal and state governments are a welcome relief, but not a panacea. The ultimate solution will be a growing economy that works for everyone.
President Tinubu has hinted on some judicial reforms that will include review of the salaries of judges in an effort reduce the temptation of bribery and corruption. Hopefully, this proposed review of emoluments in the judiciary will include the modernization of the judiciary and updates in the use of technology and faster ways to improve the administration of justice. Such judicial reforms should go a long way to reduce the incidents of unpunished crimes and scandalous acquittals.
The country needs plenty of foreign investment to improve employment. Major areas that will attract foreign investments include improved security, anticorruption, equitable taxation, flexible labor laws, enforcement of the laws of ownership and laws of contract.
The current turmoil in the economy and hardship should be seen as transitory in that would soon calm down as the reforms begin to bear fruits. Hopefully, the long-term effect of the reforms will make life more comfortable and improve the standard of living of the populace.
The Tinubu administration should keep marketing Nigeria to investors, both local and foreign by resolving issues of repatriation of earnings and profits, improvement in security, enforceable contract laws, ownership laws and reasonable labor laws. Economic diplomacy is increasingly becoming more important in the face of creeping global multi-polarization. As we maintain our non-aligned status in international affairs our economy should have no restrictions but welcome all nations who can help our economic development.
Further focus on the economy is enhanced by the equipment of the ministers with the administration’s 8-point template for rapid economic development. With the reforms focused on the fiscal and monetary policies, the judiciary, the other main area that needs urgent improvement include improved security which is foundational to most activities. Improved security will enable the free flow of daily commercial activities.
*Dr. M. Kay OLUWOLE
Email: babakay59@yahoo.com