Nothing so far has so clearly defined President Ahmed Tinubu’s economic policy direction as did his 2023 Independence Day broadcast to a bewildered and traumatized nation. The gist of it: spend and spend and spend. Tinubu told us he was a “different” president determined to “stabilize the economy, direct fiscal and monetary policy to fight inflation, encourage production, ensure the security of lives and property and lend more support to the poor and the vulnerable.”
The meat of his fiscal policy (Tinubunomics) is to spend money to appease agitated labour that is spoiling for a fight over the removal of so called wasteful fuel subsidy. The president is planning a review of the N30000 national minimum wage. In the mean time, he has announced a “provisional wage increment” for the lowest paid workers in the federal civil service. “Based on our talks with labour, business and other stakeholders, we are introducing a provisional wage increment to enhance the federal minimum wage without causing undue inflation,” said Tinubu. “For the next six months, the average low-grade worker shall receive an additional Twenty-Five Thousand naira per month.” Federal pensioners also have been promised an extra N25,000 for the next three months.
The government plans an infrastructure support fund for the 36 states. It is for them to “invest in critical areas.” This will be in addition to what the central government has given them to “provide relief packages against the impact of rising food and other prices.” Still more money out the window. According to the president, to make the economy “robust”, the government will lower transport costs. He claimed that “a new chapter in public transportation” was being opened via the introduction of “cheaper, safer Compressed Natural Gas (CNG) buses across the nation.” He said the buses “will operate at a fraction of current fuel prices, positively affecting transport fares. New CNG conversions kits will start coming in very soon as all hands are on deck to fast track the usually lengthy procurement process. We are also setting up training facilities and workshops across the nation to train and provide new opportunities for transport operators and entrepreneurs. This is a groundbreaking moment where, as a nation, we embrace more efficient means to power our economy. In making this change, we also make history.”
The government again will give funds to “enterprises with great potential” to create jobs and raise urban incomes. It will increase investment in micro, small and medium-sized enterprises. And starting this October, the government’s social safety net programme will receive additional funds to ‘catch’ another 15 million “vulnerable households”. Where will the money awarded to workers and the promised “investments” come from? Tinubu didn’t make sources quite clear. But we know that his government hasn’t a budget of its own yet. The expenditure plan it is using is inherited from the previous Buhari administration – very much predicated on external borrowings. Tinubu says his will not borrow a Kobo but rely on internally generated revenues. In August, he announced that already one trillion naira had been in the first two months of subsidy abolition. “In a little over two months, we have saved over a trillion Naira that would have been squandered on the unproductive fuel subsidy which only benefitted smugglers and fraudsters,” he said. The savings, if not yet touched, should amount to a lot by now. And the president said they would spent the president says, will be spent to improve your lot and mine”. Is this then, the spending window, since there will be no more borrowing, internally and externally? Again, Tinubu didn’t show his hand or let us read his lips on this. But it is implied.
My suggestion is to convert the subsidy savings into a national souvereign wealth fund to fall back on when the treasury is dry. Former finance minister Ngozi Okonjo-Iweala proposed it to President Goodluck Jonathan who okayed it at first first but later sacrificed it to the goddess of election in 2015. He would go on to borrow to pay salaries of public service workers. It was the first time since independence that Nigeria had had to go to the money market to pay salary.
The problem with Tinubunomics is that if you have saved money only to spend it on salaries and giveaways and not things that generate returns, you risk a spending spiral. Already, pensioners are asking that the financial award to them be extended by another three months to equal that of workers. They can’t wait to receive the first payment to be sure the pledge is real, not phoney. Another problem is why would the government invest in public transportation, knowing it is a poor performer in this sector? Indeed as in all sectors where it has put hand to the plow! The federal urban mass transit programme, started in 1993, under which individuals received loans from the government to buy mass transit buses was a colossal failure because most of the loans were not repaid. From mass transit to mass fraud, it became. In contrast, privately operated mass transiters fared much, much better. I don’t see how this Tinubu derivative, by whatever name called, will be different. My advice: let things of Caesar be Ceasar’s and things of God God’s.