Nigerians look to president-elect Tinubu for economic turnaround

Voters have been disappointed before, but some financial players are bullish on Tinubu. Will he be able to fix systemic issues in Africa’s largest economy?

Ruling party candidate Bola Tinubu, looks on in Abuja on March 1, 2023 during celebrations at his campaign headquarters
Ruling party president-elect Bola Tinubu is to be inaugurated on May 29, 2023, and Nigerians are looking at the change in government with both hope and scepticism about his ability to turn the economy around [Kola Sulaimon/AFP]

Ilorin, Nigeria – On Monday, as Nigeria’s president-elect Bola Tinbu is sworn into office, Olusegun Badmus will be one of several million people watching.

But for the 57-year-old bus driver in the central Nigerian city of Ilorin, there is barely any excitement after years of being disappointed with the government, including President Muhammadu Buhari’s outgoing administration.

Under Buhari, Nigeria overtook India as the world’s poverty capital with half of its estimated 200 million people now living in abject poverty. The naira also lost 70 percent of its value to the dollar as Africa’s largest economy experienced two recessions.

“Buhari’s government really disappointed us,” Badmus told Al Jazeera. “He is leaving the country worse than he met it, but I just hope that Tinubu will be able to perform as he promised.”

Tinubu, a former governor of the country’s commercial capital, Lagos, was declared the winner of the February 25 presidential election ahead of Atiku Abubakar and Peter Obi by the Independent National Electoral Commission.

Still, the incoming president is dealing with issues of legitimacy after winning the election with only a third of the votes in a poll in which only a quarter of Nigeria’s registered 93 million voters cast ballots.

Opposition parties have challenged the electoral process and result, citing irregularities, vote rigging and a lack of transparency in the electoral commission’s methods. A hearing into their complaints began on May 8 and is slated to end on June 23.

Some opposition supporters are hoping the transition process is stalled until there is a verdict in these cases, indicating declining trust in government institutions, said Joachim MacEbong, senior government analyst at the Lagos-based analytics firm Stears Intelligence.

“A lot of people don’t feel that they [institutions] can be fair and impartial, and that is actually the real problem here,” he told Al Jazeera.

While some Nigerians are waiting for that process to play out in court, others are already looking to Tinubu for quick economic solutions.

Controversial cuts

More than a third of the country’s population is currently unemployed, and voters expect Tinubu, 71, to create jobs, fix the free-falling economy and tighten security in line with his campaign promises.

The president-elect has also spoken of plans to reinvigorate the farm sector, increase electricity generation to resolve Nigeria’s notoriously unreliable power system and cut fuel subsidies.

He is often credited with increasing Lagos’s internally generated revenue from $3.77m per month at his inauguration in 1999 to an average of $32m per month in 2006 on the eve of his exit.

Economists are already predicting that Tinubu, who criticised a recent redesign and currency swap, is expected to devalue the naira by as much as 15 percent to help stabilise the economy.

The most controversial decision the new president may have to make may also be the most impactful one – cutting fuel subsidies.

Subsidies were introduced in Nigeria in 1973 as a temporary measure to offset a jump in oil prices. They have remained in place and have long been a controversial measure despite being used to keep fuel prices affordable.

They are widely seen as an avenue for corruption and waste, benefitting only the wealthy and middle class rather than the working-class people they were designed to help.

From January to September 2022, Nigeria spent 2.91 trillion naira ($7bn) on fuel subsidies. In the same year, more than $10bn was embezzled in a fuel subsidy scam.

In January 2012, then-President Goodluck Jonathan announced he would abolish the subsidies, triggering almost two weeks of nationwide protests by the opposition, organised labour, civil society and other Nigerians.

Jonathan reversed his decision, and Buhari dithered on the issue. But Tinubu has already stated a readiness to cut the subsidies in his first days in office.

“If you look at the fiscal health of the country, you will see that the subsidy has to go sooner than later,” he said on the campaign trail. “Nigeria’s debts are partly caused by the fuel subsidies, and the poorer people in the society do not benefit much from it anyway.”

While that could lose the new president points politically, experts say the move is the right one in Africa’s largest oil producer.

Still, there is expected to be serious resistance from many Nigerians because an end to the subsidies will also bring a surge in the cost of living.

“What I want Tinubu to do is to find a way to reduce the price of fuel and other goods and services,” Badmus said. “We buy petrol with all our profits. We barely have any money left to take home.”

If Tinubu’s administration passes this test, MacEbong said, the money it saves could be diverted into education and healthcare for low-income households.

This month, the world’s largest single-train oil refinery with a capacity of producing 650,000 barrels per day was commissioned on the outskirts of Lagos. Nigeria’s first private refinery is owned by Africa’s richest man, Aliko Dangote, but the state-owned Nigerian National Petroleum Corp holds 20 percent of the shares.

The project is expected to help Tinubu stabilise the economy and reduce inflation, which currently stands at 22 percent, economists said.

“The refinery means that we will save the central bank between $20m to $23m that would have been provided to keep importing PMS [premium motor spirit] into Nigeria,” said Paul Alaje, senior economist at SPM professionals, a Lagos-based management consultant firm.

“So that is big news for us,” he said. “We are going to have significant growth in our foreign reserve and that means that in the coming period, we are going to see a major increase in the value of the naira.”

A bullish market?

After Nigeria’s electoral commission announced Tinubu’s victory, Nigerian bonds jumped. Investment banking giant Morgan Stanley went bullish in the market, based on its hopes that the president-elect would prioritise fiscal and financial market improvements.

But that should be no cause for early celebrations yet, analysts warned, pointing to similar gains in 2015 before a reversal, brought on by a series of policy missteps by Buhari.

“The market will always try to be optimistic about the new president, but whether that will continue remains to be seen,” MacEbong said. “It depends on the reforms and how quickly they are done so the market will get the necessary signals.”

Back in Ilorin, Badmus is sceptical about any economic growth but hopes Tinubu’s time as Lagos state governor can help turn things around.

“At this point, I have my faith in God and not politicians,” he said as he parked his bus and ended his workday. “I hope Tinubu will change the situation of the country and be a balm to our suffering.”

Source: Al Jazeera