July 20, 2024

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Will shock therapy revive Nigeria’s economy — or sink it further?

2 min read

Fatai Oluwa, a patternmaker in Lagos, Nigeria’s teeming commercial capital, has started sleeping in the tailor shop where he works, often on his cutting table, so he can save on soaring commuter costs.

Since the snap removal last year of petrol subsidies by Nigeria’s president Bola Tinubu, the 24-year-old says the return bus fare for the 64km journey to his home in Ogun state has doubled to N7,000 ($4.50). That is a ruinous bite out of his monthly pay cheque of roughly $95, which also supports his widowed mother and two younger siblings at a time when he is already skipping meals to bring his daily food costs down to $1.60.

The end of the petrol subsidy, which made Nigerian fuel among the cheapest in the world, has torpedoed Oluwa’s life chances and driven millions of citizens deeper into poverty. The drastic measure is part of the shock therapy implemented by Tinubu — a set of policies that, almost inevitably, has become known as “Tinubunomics”.

Tinubu, a former governor of Lagos and a wealthy wheeler-dealer whose presidency is entering its second year, says that subsidy removal, together with a massive devaluation of the naira, is necessary to inject market discipline into the distorted and flat-on-its-back economy.

During the eight years Tinubu’s predecessor Muhammadu Buhari was in office, Nigeria’s GDP shrank, in per capita terms, as he pursued ineffective economic policies with an interventionist theme. Decades before that, Nigeria fell to the so-called resource curse: though oil contributes a relatively small amount to the country’s GDP, it plays an overweening role in state finances, making up 80 per cent of government revenue.

“Our economy has been in desperate need of reform,” Tinubu, 72, said in a television address to the nation in June. “It has been unbalanced because it was built on flawed foundations and over-reliance on revenues from exploitation of oil.” Though he acknowledged his reforms spelt “hardship” for many, he…



2024-07-10 00:01:54

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