I read with interest your article published in the 17 October 2024 edition of the Financial Times titled, _Nigeria’s economic transformation must succeed._ You argue that Nigeria’s Bola Tinubu’s market-oriented reform is a turning point and note the need for the government to remain committed to the cause, as failure could jeopardise other market reforms across Africa. However, your justification for the reforms needs to be revised and contradicts your suggested priorities for continued success.
You note that the united exchange rate, petrol subsidy cuts and monetary policy tightening marks a turning point for Nigeria and must be allowed to suceed. In justifying these economic reforms, you state that the deregulation of the exchange rate eliminated the arbitrage exploited by _Some local elites, who acquired dollars cheaply at the government’s expense._ You argue that the petrol subsidy cuts would strengthen Nigeria’s fiscal position and shore up the Naira. Additionally, you note the monetary tightening in response to the increasing inflation would _Boost confidence in the Naira and anchor inflation expectations._ Despite the difficulties resulting from these reforms, you state, Nigeria will need to stay the course if it is to become an engine of growth in Sub-Saharan Africa.
A famous quote often misattributed to Albert Einstein is, Insanity is doing the same thing over and over again and expecting a different result. This would not be the first time Nigeria has implemented Neoliberal market reforms that have resulted in disastrous results. Yet, you continue to justify these ineffective reforms that heap misery upon the Nigerian masses. You completely ignore the legacy of the Structural Adjustment Program implemented in Nigeria in 1986. These reforms, which Bretton Woods Institutions championed, entailed currency devaluation, trade liberalisation, austerity and deregulation. The result was disastrous for Nigeria, and the country has yet to recover from the impact of the neo-liberal reforms. No thanks to the 1986 market reforms, Nigerians faced youth employment, an increase in its external debt profile, and elevated school dropout rates due to increases in tuition, business closures, economic hardship, unemployment, social unrest, strikes, deindustrialisation and reduced access to social services. It is incredulous that despite these documented impacts, you are still calling for the same reforms to be implemented again.
As you call for the sustained commitment to these reforms, you fail to draw a link between these failed policies and the human cost. Instead, you call for the establishment of a Cost-effective safety net to protect the most vulnerable.” Is this not like giving someone crutches after breaking their legs? Due to Bola Tinubu’s economic reforms, which you praise in glowing terms, Nigeria faces soaring inflation, increased transport costs, unemployment, shrinking purchasing power, crime, protests, business closures, food insecurity and low industrial capacity utilisation. Due to the side effects of these neo-liberal reforms, Nigerians have now baptised Bola Tinubu with their sarcasm by rechristening him with the apt name T-Pain.
For too long, the IMF and World Bank have developed theoretical policies disregarding the realities of people living in the Global South. In his groundbreaking book, Confessions of an Economic Hitman, John Perkins describes how powerful entities like the Bretton Wood Institutions manipulate the Global South in the interest of the West. It is easy for officials from Bretton Wood Institutions to pontificate about the merit of market-oriented reforms and urge Nigerians to stay with the cause amid hardship. I would be grateful if you could implement this novel suggestion. Since you are in support of Nigeria’s market-determined exchange rate, which has depreciated by 71.8% between the time President Bola Tinubu was sworn in on 29 May 2023 and the date of your FT piece, I suggest you ask your employer to reduce your salary by 71.8%. Once approved, ask them to denominate your reduced salary into Naira. After which, request a transfer from your plush office at 1818 H Street, NW Washington, to an office in Maiduguri, northeast Nigeria. After spending two years there at your reduced salary, which the devalued Naira has battered, it would be interesting to read another article from you justifying the market-oriented reforms.
Ever since Bola Tinubu’s administration implemented these reforms, amid the suffering of the Nigerian masses, he has been receiving praise from the IMF, World Bank, Kamala Harris, and US Deputy Secretary of the Treasury. Ha-Joon Chang describes such organisations and people as Bad Samaritans pushing Neo-liberal reforms while ignoring the West’s protectionist past. It is hypocritical for Western countries, along with their agencies, to advocate free-market reforms while, at the same time, they are giving subsidies to protect their critical industries. Examples of these Bad Samaritans are the USA, which, with one side of its mouth, says that it supports President Tinubu’s steps to reform Nigeria’s economy, including ending the fuel subsidy and unifying foreign currency exchange rates. In contrast, with the other side of its mouth, it gives a $369bn subsidy programme to spur investment in green technology and address climate change. As this is happening, the IMF and World Bank look the other way even though the USA has a debt-to-GDP ratio of 122.3%. To put it succinctly, the unholy trinity of the Economic Hitmen from Washington, Bad Samaritans from the West and T-Pain from Nigeria has betrayed the Nigerian masses.
Mr. Gill, your proposed safety net is at odds with the country’s deteriorating fiscal position. As more people fall into poverty due to the devaluation of the Naira and removal of fuel subsidies, wouldn’t the safety net you propose to mitigate the effect of the reforms worsen the country’s fiscal position, leading to a vicious cycle of more reforms leading to more poverty to fiscal deficits?
The policies you support should not be called economic reforms but rather economic suicide. Nigeria is not facing an economic transformation but rather an economic armageddon. Rather than supporting policies which suck the blood out of Nigerian masses, the World Bank should turn its attention to tackling corruption and illicit financial flows. According to the IMF, the implicit subsidy will cost Nigeria $5.9 bn. However, according to the Civil Society Legislative Advocacy Centre, Nigeria loses $18 billion annually to illicit financial outflows driven by tax evasion, corruption, organised crime and trade mispricing. There are alternative solutions, and it’s time we explore them.
Furthermore, according to the Independent Corrupt Practices & Other Related Offences Commission, Africa loses approximately $50 billion annually due to profit shifting by multinational corporations, with Nigeria accounting for 20% of this loss. Research by PwC revealed that Nigeria’s 2014 GDP could have been 36% higher if it had reduced corruption to Malaysia’s levels, and up to 37% of GDP could be lost by 2030 if corruption is not dealt with immediately. These illicit financial flows would not have been possible without the help of the Western financial system in the form of financial institutions and tax havens, which aid these illicit flows by concealing beneficial ownership, reducing tax liabilities and facilitating money laundering. The unholy trinity of the Economic Hitmen, Bad Samaritans and T-Pain should declare war on corruption and illicit financial flows rather than declaring war on the Nigerian masses.
In conclusion, rather than calling on stakeholders to support the draconian Washington Consensus reforms, Bretton Wood Institutions should rethink its neoliberal ideology, which your predecessor Joseph Stiglitz describes as Another example of the rich old boys club imposing their will.
By Ahmed Olayinka Sule, CFA
