Presidency hits back at New York Times report, says Tinubu inherited bleeding economy
…Says previous administration spent $1.5bn monthly to protect Naira, relied heavily on borrowing
…Nigeria ends 17 years $84.39bn petrol subsidy drain amid financial crisis
…Tinubu’s economic strategy garners W’Bank support, boosts investor confidence
By Sodiq Adelakun
The Presidency has responded to a New York Times article titled “Nigeria Confronts Its Worst Economic Crisis in a Generation,” denying that President Bola Tinubu’s administration created the country’s current economic problems.
In a statement on Sunday, Special Adviser to the President on Information and Strategy, Bayo Onanuga, said the article reflected a biased and derogatory approach to reporting on African countries.
According to Onanuga, the report focused on the negative experiences of some Nigerians amid inflation, blaming it on Tinubu’s policies, while ignoring the positive aspects of the economy.
The Presidency emphasised that Tinubu inherited the economic challenges, dismissing the article’s claims.
“The report, based on several interviews, is at best jaundiced, all gloom and doom, as it never mentioned the positive aspects in the same economy as well as the ameliorative policies being implemented by the central and state governments,” Onanuga said.
“To be sure, President Tinubu did not create the economic problems Nigeria faces today. He inherited them. As a respected economist in our country once put it, Tinubu inherited a dead economy.
“The economy was bleeding and needed quick surgery to avoid being plunged into the abyss, as happened in Zimbabwe and Venezuela. This was the background to the policy direction taken by the government in May/June 2023: the abrogation of the fuel subsidy regime and the unification of the multiple exchange rates.”
He said that President Tinubu has terminated the long-standing petrol subsidy regime, citing its staggering $84.39 billion drain on public funds between 2005 and 2022.
The subsidy, which had been criticised for worsening infrastructural deficits and neglecting social services, burdened the Nigerian National Petroleum Company (NNPC) Limited with trillions in debt.
As of June 2023, the national budget no longer included provisions for fuel subsidy payments, underscoring the dire fiscal situation inherited by the current administration.
The previous government’s strategy of heavy borrowing to sustain the subsidy had led to a budget allocating 97 percent of revenue towards servicing debts, leaving minimal resources for essential expenditures.
President Tinubu’s spokesperson, Onanuga, described the subsidy’s termination as a crucial step in combating the “cancer of public finance” and halting excessive generosity extended to neighbouring countries.
Additionally, investigations revealed that the Central Bank of Nigeria (CBN) had been spending approximately $1.5 billion monthly to maintain an artificially subsidised exchange rate, aimed at shielding the naira from the relentless demand for US dollars.
“The subsidy on exchange rates had unintended consequences, fostering arbitrage and widening the disparity between official and parallel market rates. Simultaneously, Nigeria struggled to meet financial obligations to international airlines and other foreign entities.
“This bold policy shift towards subsidy removal marks a pivotal moment for Nigeria, signalling efforts to restore fiscal responsibility and prioritise economic stability amidst daunting challenges.
“By the time President Tinubu took over the leadership of the country, there was no provision made for fuel subsidy payments in the national budget beyond June 2023,” the spokesperson said.
“The budget itself had a striking feature: it planned to spend 97 percent of revenue servicing debt, with little left for recurrent or capital expenditure. The previous government had resorted to massive borrowing to cover such costs.”
According to Onanuga, to deal with the cancer of public finance on the first day, Tinubu had to end the subsidy regime and the “generosity that spread to neighbouring countries.”
He revealed that the Central Bank of Nigeria (CBN) has been allocating approximately $1.5 billion each month to subsidise the exchange rate. This measure parallels the subsidy approach previously employed in the oil sector to defend the local currency.
However, this policy has inadvertently fueled arbitrage activities, leading to a widening disparity between the official and parallel market exchange rates. During this period, Nigeria also encountered difficulties in meeting its financial obligations to international airlines and other foreign entities.
The substantial expenditure aimed at stabilising the naira underscores the challenges faced by Nigeria’s financial authorities amidst economic pressures.
“Like oil, the exchange rate was also being subsidised by the government, with an estimated $1.5 billion spent monthly by the CBN to ‘defend’ the currency against the unquenchable demand for the dollar by the country’s import-dependent economy,” he said.
“By keeping the rate low, arbitrage grew as a gulf existed between the official rate and the rate being used by over 5,000 BDCs that were previously licensed by the Central Bank. What was more, the country was failing to fulfil its remittance obligations to airlines and other foreign businesses, such that FDIs and investment in the oil sector dried up, and notably Emirate Airlines cut off the Nigerian route.”
He said the president’s administration also floated the naira to deal with the cancer of public finance.
Onanuga said stability is being restored in the foreign exchange markets since the naira depreciated to an all-time low of N1,900/$, although he acknowledged there are still challenges.
“The exchange rate is now below N1,500 to the dollar, and there are prospects that the naira could regain its muscle and appreciate to between N1,000 and N1,200 before the end of the year,” he added.
He also said the economy recorded a trade surplus of N6.52 trillion in the first quarter (Q1) of 2024, against a deficit of N1.4 trillion in Q4 of 2023.
Highlighting other positives from the reforms within Tinubu’s first year, Onanuga said portfolio investors have streamed in as long-term investors.
“When Diageo wanted to sell its stake in Guinness Nigeria, it had the Singaporean conglomerate, Tolaram, ready for the uptake,” the spokesperson said.
“With the World Bank extending a $2.25 billion loan and other loans by the AfDB and Afreximbank coming in, Nigeria has become bankable again. This is all because the reforms being implemented have restored some confidence.”
Onanuga said the inflationary rate is slowing down according to the National Bureau of Statistics (NBS) data for April.
“Food inflation remains the biggest challenge, and the government is working very hard to rein it in with increased agricultural production. The Tinubu administration and the 36 states are working assiduously to produce food in abundance to reduce the cost,” he said.
“Some state governments, such as Lagos and Akwa Ibom, have set up retail shops to sell raw food items to residents at a lower price than the market price. The Tinubu government, in November last year, in consonance with its food emergency declaration, invested heavily in dry-season farming, giving farmers incentives to produce wheat, maize, and rice.
“The CBN has donated N100 billion worth of fertiliser to farmers, and numerous incentives are being implemented. In the western part of Nigeria, the six governors have announced plans to invest massively in agriculture.”
According to the special adviser, with all the plans being executed, inflation, especially food inflation, will soon be tamed.
Onanuga said Nigeria is not the only country in the world facing a rising cost of living crisis, adding that the United States is also experiencing a similar situation, “with families finding it hard to make ends meet”.
“US Treasury Secretary Janet Yellen raised this concern recently. Europe is similarly in the throes of a cost-of-living crisis. As those countries are trying to confront the problem, the Tinubu administration is also working hard to overturn the economic problems in Nigeria,” he said.
