Nigeria's Tinubu faces daunting hurdles after reform sprint
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[June 27, 2023]
By MacDonald Dzirutwe
LAGOS (Reuters) - New Nigerian President Bola Tinubu has moved at
lightning speed in his first month in office, implementing a raft of
radical changes aimed at finally unleashing the full potential of
Africa's sluggish economic giant.
But while his rapid headway on reforms has wowed investors, some
analysts, observers and business leaders warn that bigger challenges
await and question whether the 71-year-old - viewed by many as part of
Nigeria's old guard - is really the man to take them on.
"There has been a big policy shift (but) I think there are things that
investors would like to see happening to really be convinced that this
is a clean break from the past," said Jason Tuvey, deputy chief emerging
markets economist at Capital Economics.
Nigeria today faces record debt, unemployment is worryingly high, and
power shortages have contributed to years of anaemic growth. Oil output
is shrinking. And rampant insecurity has placed swathes of the
countryside outside government control.
Solving those problems would be hard. But the task is made harder,
observers say, by the rampant corruption and entrenched patronage
networks so often blamed for the country's woes.
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"The path to political power in Nigeria, over time, has always been
through these vested interests," said Bismarck Rewane, CEO at Financial
Derivatives Company in Lagos.
"When you deny them of their source of livelihood, then they will fight
back."
KEEPING THE PEOPLE ON SIDE
Days after his inauguration, Tinubu scrapped a decades-old petrol
subsidy. He then quickly suspended the central bank governor and freed
up the exchange rate.
Both reforms should have long-term payoffs. Cementing them in the
near-term won't be easy, however.
In a televised appeal, Tinubu argued ending the costly subsidy would
free up money for education, regular power supply and healthcare, and
"save our country from going under".
But the subsidy was popular.
Petrol prices have nearly tripled, hitting millions of households and
small businesses that rely on petrol for power because the national grid
is patchy. Transport fares have soared for workers and farmers taking
produce to market.
"Tinubu said he was the best man for the job but we go suffer already,"
said Lagos driver Tunau Taiwo, 38. "What will happen after six months?"
An attempt to reduce the subsidy a decade ago provoked protests, forcing
the government to backtrack. And unions are calling for Tinubu to
reverse course or, failing that, impose a six-fold hike in the minimum
wage.
Ending forex restrictions and unifying the exchange rate to end chronic
dollar shortages will cause further pain.
The resulting naira devaluation could accelerate inflation in a country
where four in 10 live below the poverty line.
Tinubu won't be able to count on post-election popularity while he waits
for reforms to bear fruit, having garnered the fewest votes of any
president since military rule ended in 1999.
His win is still being challenged in court.
"Nigeria was already hurting, so he needs to build consensus around the
reforms. He has a legitimacy deficit," said Nnamdi Obasi, senior Nigeria
advisor for the International Crisis Group think-tank.
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![](../images/062723PIX/news_q33.jpg)
Nigeria's President Bola Tinubu waves to
a crowd as he takes the traditional ride on top of a ceremonial
vehicle, after his swearing-in ceremony in Abuja, Nigeria May 29,
2023. REUTERS/Temilade Adelaja/File Photo
![](http://archives.lincolndailynews.com/2023/Jun/27/images/ads/current/fcs_funeral_lda_border_04029022.png)
ENTRENCHED NETWORKS
Tinubu's ambitions to build a $1 trillion economy in eight years
could come unstuck in part due to chronic power shortages. The
national grid produces only 4,500 megawatts, leaving millions in the
dark.
Getting the lights on would be a major win, but to do so some say
Tinubu must remove grid subsidies and cut red tape.
"If deregulation happens and actual prices are reflected, then the
value proposition becomes crystal clear, and there will be more
investors willing to invest in the sector," said Prince Ojeabulu,
CEO at renewables firm Rensource Energy.
But Nigerian state authority is largely built on control and
subsidies that keep prices low and vested interests happy.
Tackling insecurity will be equally thorny.
When predecessor Muhammadu Buhari came to power in 2015, many hoped
the retired major general would successfully crack down on armed
groups.
Instead, violence that had mostly been confined to the northeast has
spread.
Tinubu cleaned house last week, removing security chiefs and the
head of police. But he faces obstacles.
The military has its own entrenched patronage system, while
political analysts say armed groups in the Nigeria Delta involved in
industrial-scale oil theft operate with support from some
politicians.
And some northwestern armed gangs behind kidnapping rings started as
crime-fighting vigilante groups backed by state-governments.
Tinubu will be judged on how he tackles these networks, their
corruption and criminality. Analysts say there are reasons to
question his commitment.
Tinubu has said he will set up a surveillance unit to protect oil
pipelines and create "anti-terrorist battalions" and special forces
to fight jihadists and armed gangs. He also wants the military
involved in community initiatives to "win hearts and minds."
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As a member of Buhari's ruling party, Tinubu benefited from a
political machine and largely owes his election victory to its deep
political, religious and tribal networks.
Observers worry that could leave the new president beholden to them.
Tinubu suspended the head of the financial and economic crimes
agency, but has yet to outline an anti-graft plan.
"He has never been known to be a great fighter of corruption," said
Obasi. "He hasn't said anything memorable about it and his body
language doesn't suggest anything revolutionary will be done."
(Editing by Joe Bavier and Conor Humphries)
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