Dear Subscriber,

Nigerians are bored silly when they hear that the country is resource-endowed. They equally yawn widely when they hear that income per capita is low. What is of interest today is how to overcome these impediments. Each and every administration starts off with lofty promises and ends up with a catalogue of failures. Like they say, “in like a lion and out like a lamb.” Why should this administration be any different?

From euphoria to frustration

President Tinubu bit the bullet during his inauguration. In less than one month, he superintended a series of disruptive reforms, including petrol subsidy reduction, forex market desegmentation, and tax reforms. While these reforms came with initial euphoria, there are questions about whether they will unlock productivity as macroeconomic challenges persist. At a time when Nigeria is on the brink, the country could either win big from these reforms or lose everything.

Revenue reforms are necessary but not sufficient!

Revenue-based reforms take money from individuals and businesses and put it in the hands of the government. For example, the Tinubu-led reforms are expected to double the federation’s earnings to N22 trillion while reducing the income of the non-government sector by N14 trillion. This calls for two contemporaneous actions. First, the government should boost fiscal spending to increase earnings for businesses and households. Second, the FGN should prioritize removing the embedded structural bottlenecks that bookend extreme poverty, constrained growth, and macroeconomic instability.

Are the markets to blame?

Taking a page from the book “The Gods Are Not to Blame” by Ola Rotimi, economists are saying that our failures should not be blamed on the markets. Adam Smith, recognized as the father of modern economics, deemed that a free market (invisible hand) is the most efficient way of distributing scarce resources.  Going into 2024, it is imperative for policy communication to be coherent and consistent to avoid the unintended consequences of market reactions to policy inactions or wrong policy therapy. In the words of Milton Friedman, “blaming the market for economic challenges is like blaming the thermometer for the fever.”

In this edition of the Prism (Biznomics), the FDC Think Tank delves into an in-depth analysis of these recent economic developments and their wide-ranging impacts on households and businesses.

Enjoy your read!