Democracy Day: Examining the Gains and Pains of Tinubu’s Economic Reforms

[00:00:00]All right, thank you so much uh for staying with us. Now, as Nigeria marks 3 years since inauguration of President Bahameinu's administration and of course democracy day today, his administration continues to defend economic reforms agenda are driven by fuel subsidy removal, foreign exchange reforms and stronger government revenues and renewed investor confidence. Now, this is as many Nigerians grapple with rising inflation, growing public debt, and worsening living conditions in some cases across the country. President Tinumbu's economic policies remain among the most debated issues in Nigeria's economic landscape. Supporters argue that the reforms have restored fiscal stability that uh and also improved microeconomic indicators across the board. But for critics they maintain that the burden of adjustments has fallen heavily on households and businesses. The second uh this our chart that's our chart today of course will focus on the economics and policy trust of president Balatinumbu's le administration and my guest is no other person than professor Ken E is a development economist. He joins me live from Abuja for this conversation. Prof, good afternoon and happy democracy day to you.

[00:01:24]>> Oh, thank you. And happy democracy day too. [laughter] >> Puff, I think we should >> I just want to feel it. I want to feel it in my pocket.

[00:01:31]>> Yeah, same here. Same here. I want to also feel it in my pocket, Prof. [laughter] But Prof. Let's take a step backwards.

[00:01:38]You know, most of all of this are better than we do. uh before now we've heard of series of economic policies at least for me to growing up I heard of uh structural adjustment program I heard of um uh vision 2010 at a particular time and a lot of visions before now and of course policy uh trust of various administrations. I want to ask you if you take us a step backwards. Yes. What has been the trend compared to where we find ourselves today in 2026?

[00:02:15]>> Okay, let me look at there are three spheres to look at and then under each of those sphere we can drill down. First of all, you have the political economy because you have two areas. You have the democratic governance, political governance and then you have the economic governance. Let's stay around economic governance. Now in the economic governance you have three sections. One is political economy and what I mean by political economy is what has president done to further the agitation that been going on since 1999 all of that about fiscal uh autonomy.

[00:02:57]Then second area is macroeconomic governance and then there's a lot to say there. Then the third one is micro coming down to the grassroot and then that's where you find people disagreeing a lot on what has happened or what has failed to happen. All right, let's get to the very first one. No governor, no president in this country has moved Nigeria close to that whole issue of fiscal governance and fiscal um federalism as president Tinugu and unfortunately they don't even seem to be talking about that great achievement.

[00:03:35]Let me [clears throat] outline some of them. One is that he just came in immediately apart from what he did on subsidy and all that. He actually went straight to the governors removed that electricity from the exclusive list and put it to concurrent list and say governors get into the act Lego and some that quickly got into the act and that is going to expand electricity in a world that we haven't seen before. Then secondly, he now said okay called them said I want state police and they said okay they agree but I think there is one step forward and two step back but they going to ramp up speed on that because that has a critical role to play in security that is so pervasive the third one is he said okay look I'm going to set up all these regional development agency everybody should go back and organize their region that is positive and in fact you could even see that northeast is already been there NDC has been there but Southeast before you say Jack they've done 30 year development plan and then others are are queuing in so that is a traffic that is a traction in that area. He also ran to Supreme Court and said look can we have local autonomy financial autonomy for the for the AGS local governments and that is push is going but I said make an executive order but there are still some luna that we need to address because you might well require supreme court being asked to interpret section 7.1 of the constitution in relation to their judgment and that will now sort out all the contentions that we have there but he didn't stop there revenue mobilization He's doing something there. He has amended the act 2025 given them cheat made them more independent and they now able to enforce a revenue collection and then in fact he's even done the biggest thing that I never even nobody even thought he could do is to bring presidential law 009 to decapitate NPC because let me tell you this any president that doesn't come to terms with what happens in central bank and NNPC is just on a roller coaster now he's got central bank solidly and then he getting results now he's decapit created NNPC and putting it putting it in the right place. So which is why you are going to see more revenue, you're going to see more traction in that area.

[00:05:48]But he also have he must also have the political courage to blow away OPEC. We don't need OPEC anymore. It is just a big clog in the wheel of our refining capacity that we are heading out to but we can talk about that in detail. Now he's also gone to the collection fee of 15% on VAT and said to 5% of it to govern us and they keeping only 10%. Now he came to national development you mentioned national development plan I took part in vision 2010 vision 2020 in vision 2021 to25 I was actually national chair for three subgroups for three thematic groups I I chaired bioeconomy digital economy and science technology and innovation so I I was central to that job and then I got things like bioeconomy into the into the development plan so I was involved but now this one I was in the national economic council conference where we for the first time presented what is going to happen on the vision 20 2026 to deployment plan to 2030 and I saw a radical change that saying to sub nationals come and drive national development now again you can see that he's pushing everything down to national develop you know reducing more power from the center and devolution devolution that power to local government and state government that is the way to go so that you can encourage them to become active participants in the economic field. So that's the way to go. And people are not mentioning this in any way but that's all right. I'm not advertising [laughter] the progress progress. Now you move to the second area which is the macroeconomy.

[00:07:24]Now macroeconomy includes the like of fiscal policy, >> monetary policy, trade policy, investment policy, industrial policy. In each and in each of these areas, there are some remarkable achievements. For example, in the fiscal space, we have a review, a reform of the fiscal space.

[00:07:43]Now, that has also come in because it hasn't been reviewed for more than for in it was in the early I think 50s and 60s it was necessary and that reform has put us in a better state to achieve many of the things. It only just been started implementation. But I can tell you that when I read that reform with the revenue mobilization and reform act, I can see hope because that act has brought in OECD threw away all a lot of these items on base erosion and profit shifting and is addressed them minimum effective tax rate of 15% for multinational that don't want to pay tax they're going to pay 15% whether whatever they like it or not.

[00:08:22]Then you have all these 5% that he has sorted out a lot of things that act those ones have sorted out a lot of things and the new powers to Ramfact Ramfact the presidential order we are going to be cruising on revenue in that in that area because that 30% NMPC was taken and then the 30% for frontier basation account so that is good news now but that is still not the end of the fiscal side we still have lack of transparency when it comes to borrowing and then there are so many challenges around borrowing and the the efficiency of it and the you know there's a lot of stuff there that are very very ugly but nevertheless we we have some gains in the fiscal space you come to the monetary monetary is Rolls-Royce I mean these guys are everywhere they're doing extremely well not to even talk about the recapitalization of the banks because you remember in 1993 we deregulated under Babangeda the banking sector We had 98 banks. Then 2205 we they moved in for the capitalization.

[00:09:27]We withdrew them down to 22 banks and then the capitalization was like two from 2 billion to 25 billion. Those who were able to raise 100 billion got an incentive to to to to manage 500 million of of our foreign reserves. This time round that ended in January they had to move to 500 billion and and that was very successful. 33 banks crossed it. Other four banks are still on the way to trying to sort out things.

[00:09:54]But we have huge success. $3.36 billion dollars brought in by that capitalization which is equivalent to some trillions of naira. So that is good news. So the next stage is now the central bank is going to have to manage what these banks put the money into and sort of that. But then the bank has not rested. The bank has come in to announce um this this program this 2028 uh payment uh plan that's that one is is massive because what they are doing here is that they have huge targets of bringing in bringing >> the more people into the into the financial system about 50 million people >> financial will be will be in the net so that is grand ambition and then they have things like a code that are bringing in so that this code will help you and then they're going to build specific infrastructure in market places in transport hubs and all of that so that they can that is massive and that is going to because that going to deal with the main problem of transmissibility of monetary policy where most of the money is outside the banking sector and in the informal sector they're going to squeeze that and then where we have more unbanked people they're going to get more people more bankked people you know so it's is it's kudos to central bank and then you've got to see it just a few a day ago this this guy got an award CBM bank here so that is good news and I continue to build on that but let me tell you what >> it is important that we capture the macroeconomic end >> exactly >> which is is where before you can unlock the the the subnational end which is a which is a balance you're going to get that balance >> yes proof allow me but in now and ask you just like you mentioned mentioned many of these gains uh analysts have ascribed to being very positive for the macro and the micro uh economy that that that that aspect of it is where many say the issues are. Now let's take it one after the other. It's democracy day and everyone wants to enjoy the dividends of democracy.

[00:12:06]What are those things? What are those quick wins? Because now we know that it's from reforms to results but that results everyone wanted to put food on their table put monies in their pockets how do we manage it that is really my question now that was the third section that I was coming to cuz I've dealt with the political economy and that is fiscal federalism I've dealt with macroeconomy the only thing I didn't talk about is industrial policy because we are still struggling with trade policy and investment with a lot of investment activities But industrial policy needs to go far enough because the main challenge why you have this disconnect between the progress you are making on the m macro and the lack of progress on the micro seeming lack of progress on the micro is because we have an import dependent economy and and it's so unfortunate that that import dependency coincides with our natural resources and mineral resources. So that is where it is a tragedy. If it is import dependence on on cars and ICT products then you wouldn't bother that much. But when it is coincides with your natural economy then it is a tragedy because it means ineffectively that you exporting raw uh mineral raw natural agricultural product raw crude and raw gas and you are exporting your jobs and you're importing poverty. That's exactly what it means.

[00:13:33]There's if you look at value chains of gas value chain, petrol uh crude value chain, crop, cocoa, uh rubber value chain, look at all these value chains, cava value chains, solid mineral value chain, you only get about 10% of the value of that chain by sending out raw materials, maximum 15%. But you have to go and borrow 100% to afford the finished product that will come back to you. But who gets the job is the people who add the value that get that get the jobs that get the profit. So that's why it's all got it wrong. And so when we are talking about export we have to be talking about exportled growth strategy.

[00:14:15]If you don't do exportled growth strategy and you are doing domestic production for domestic consumption you have missed the plot. your poverty will continue to worsen because you will not be able to deal with predatory pricing and dumping of things on your country and demolition and destruction of all your industrial manufacturing capacity.

[00:14:33]The way you aim at export-led growth strategy, then you will sit in the same room with China that drove 400 people out of poverty with that strategy with India that took away 200 million out of poverty or with the rest of the Asian economies that got 200 million that's Malaysia, Indonesia and all that stuff.

[00:14:53]So that's where Nigeria has to locate our program. And then when you do this you now trade trade policy come and address exportled growth strategy or your fiscal policy come and tell me what you can do. Okay monetary policy come and tell me how you can help this and the monitor policy will begin to react in a way that it is a bit different from what he's doing right now. And then you tell the investment policy focus on this and we are doing well because we are now the new investment protection that accompanies our bilateral with UAE with Saudi Arabia with uh UK, with China, with Brazil are actually going to encourage people to bring equipment and technology to come and manufacture in Nigeria. not only to satisfy Nigerian demand but also to export to Africa the Africa continental free trade. This is because there's an investment protection component. So it is not business as usual. So government needs to be moving in that area. So you can see that the investment policy is beginning to address that area. But we need to get the banking monial policy to address that by knowizing production and there are many things they doing that will encourage that. But fiscal fiscal is the big elephant in the room when it comes to addressing addressing this because it is the fiscal that suddenly will start giving import license for people to import rice patty and then discomfort all the people who are producing rice and then turn around and import maze and then everybody's crying. I'm in Kaba value chain. We are suffering. So it's because of that import giving license to import this from East Africa and all of that that is making people who are producing wanting to walk out of the agricultural value chain. So in answer to your question, there's more that we have to do. Insecurity notwithstanding, there's a lot more that we have to do to ensure that we have economic inclusion, >> not just social inclusion, economic inclusion because the smaller farmers would have to be brought in and then okay, if look, you don't subsidize consumption. What you subsidize is production. It's instead of importing this, subsidize those who are producing that. So that means you creating the jobs more and then let me tell you this one cardinal one is an and a a bill has been passed for 30 mandatory 30% value addition on our raw materials before export. Now that bill has been approved by both senate and house of reps and he's been sitting with the president for 9 months. So when the president went to kegali and was telling African presidents don't import your raw material I was like really but you haven't signed the bill sitting on your table for 9 months. So you know in echoas you know I'm in echoas for more than 20 years we have been promoting 30% value addition Nigeria doesn't want to know then Ghana is doing 50%. And even the African continental free trade we are heading into is 40% that they require. So why can't Nigeria do 30%. I don't know what what is going on. If you look at crude we should not be exporting crude at least the ones on on shore.

[00:18:00]Offshore may be a different story. They need time because the de investment is very intensive. But we should have Nigerians doing it. We should have because we have local capacity now that I exceed the current supply by next year end of next year that will double to 1.34 million barrels. Bua is coming with 200 50 500,000 barrel is coming in from on people putting 50 billion where you going to get and NBC is bringing in Chinese for them to do 300. We'll be looking for 3 billion million barrels a day and you auto OPEC is sitting on your head telling you one point if you should blow OPEC away we don't need OPEC it's all gone we finished with them we are no longer in their in their courts we are now on refining refining refining that's the business in town so if if president wants to deal with this area get out of OPEC >> number one absolutely you've got no reason you've got nothing look at okay look at our our oil we are selling to PMS $0.9 per liter. [snorts] Yes, Ghana is doing 1 $1.3.

[00:19:07]Codivo and Genega $1.7. But how about Angola? Angola is out of OPEC out. But they're selling at33 almost oneird of our our listing. So what do you say to that? They got to get out of OPEC. And are you are you wiser than UAE that has gone out? Are you wiser than all the other countries that have gone out? Well, >> I mean that's that's a club is a club of you know I don't know how to describe that club completely irrelevant to what Nigeria wants to do where we want to be right now. You don't want that capacity for three billion million barrels and then you only you're only telling them 1.6 no 1.8 eight. Nah, no. And let me tell you this, if you don't get out, big investors who want to come to upstream are not coming. Why will you bring $5 billion to come and invest in upstream to produce when you know OPEC will block you from selling it? So you go to get that we have to get real and then all this all this all this pipeline of joint ventures JV that this guy has this um production contracts that NPC has. I mean the livesto they can take over those those those business and then let these guys go more upstream let them go upstream so that we can produce more to meet local demand and make more money all right then now prof it's getting more more more interesting but you know there are concerns here let's look at agriculture which everyone talks about we just heard AFDB is even wanting to support Nigeria with some amount of money again uh with regards to growing agricultures, small holder farmers and all of this but the challenge of insecurity is also on one side uh food inflation was we saw a bit of decline uh before the middleisting crisis came up again. So uh looking at all of these challenges and setting uh a target ahead, it's also a pre-election year. Do you think that um government might move away from policies you know initiating policies or instituting policies and following it up to the latter you know so that Nigerians can feel the impact or you think politicking will take charge in another few months.

[00:21:25]>> Well the thing is this these matters will get could get worse if they are not giving a gentle attention. If this security continues, there will be precipitate reactions that we didn't expect and so we need to tackle tackle that the farmers are at a crossroad right now because if I give you myself as an example what has happened in the cava value chain where we are you be you would not be surprised why farmers are running away from cava right now. Last year just within a year the price of 40ft container that will carry our products of course you know that is 70% water uh in in in water content it cost it was costing 800,000 naira now is 2.4 million 300% increase just to transport either the stem or the raw casaba or the finished gar or whatever product or starch. Okay. Okay.

[00:22:22]Secondly, the stems that we were selling and buying and selling for 1,500 is 6,000. That's 400% increase. The G that the cava pro cava we were selling and buying early last year for 130,000 to 150,000 crashed to 60,000 naira per ton.

[00:22:42]Now the G that was sold 50,000 to 60,000 for 50 kg bag is now 20,000. So tell me why anybody wants to stay in that industry >> because you you are completely born completely burn out. You can't you can't make money. There's no way to make money now. So they they running away. But if you were doing export-led growth strategy, you will see that your production system and processing systems here are not going to be focusing on casaba fufu and start and they will start focusing more on the extended products because 34 products are available for you in in casaba and almost 200 when you go to HS level six.

[00:23:25]So it means that at the export level you are hitting many markets all over the world with so many derivatives of cava and all of them kept their prices and they keep going up buy and all was going up. You see what I'm saying? So the people that will this is when you focus on export you now have backward integration. You now feed back to your producers the profit and the opportunity. So you you are the one to sustain this just being expert who sustain the base not government throwing money not throwing money and they sharing money they said they giving this they didn't give anything they gave it some people and shared it that's that is what is missing >> prof a notch a notch further now to see issues around critical infrastructure projects many would say that president tinu has done so very well with regards to major roads sooto badri highway we've seen the loss calaba coastal highway and all of that. That is also somewhere where many say a lot has been done and of course this will boost regional trade and um of course creating jobs and all of this. Uh if we look at that and of course on the other side look at some of the reforms in the oil and gas industry. You've talked about the NNPC remitting funds to federal government coffers and all of those positives. Let's put all of that also together. It's not all bad news, would you say?

[00:24:51]No, let me tell you [laughter] any news is good news. But let me tell you this, we have to take a step back.

[00:25:01]I'm not I have nothing against legacy projects >> like the the corridor project or the the they are legacy projects. They are very important in their way but they have not been subjected to serious economic analysis. In other words, costbenefit analysis. They will generate profit in the long term but in the short term it has made you you abandon even paying contractors who have worked with federal government for 3 years for 2 years and then you have problem. See what see the next this mess we went into last year where contractors are carrying coffin to ministry of finance and then keeping night vision in ministry of finance. Is that the best thing to do? So we done so many positive things. So what what what I wanted to say to you is this. There are very very important project but there are fiscal laws governing borrowing.

[00:25:54]If you are borrowing money, the law allows you to use your own IGR to do anything you want to do. So if you are going to use your IGR to do projects that have a maybe a longer term tenure that you cannot justify economically in the short term then you can now borrow to do the one that can give you the value because what the law says is this borrow money for physical capital expenditure and human resource development but in the capital expenditure says infrastructure and there has to be infrastructure that are viable capable of returning the money that is the reason >> and then then human res and then productive capacity that will be able to energize the economy in the short run you can get the money back or you have because if you borrow and you can't repay then you keep borrowing and the cost of service goes high look at it now if last week they told us that $2 trillion naira more than what was budgeted was being spent on debt service that could not have been the case and then they are now talking about the the borrowing profile is even higher than the revenue that you expected to get. That means that all the borrowing are not going to capital expenditure.

[00:27:07]And then you look at go and interrogate many of the borrowing. Many of the borrowing are not for infrastructure.

[00:27:12]The law doesn't allow the law allows for the human resource development which is health, energy, health, education, employment and self-employment. Yes. But the law does not allow you to borrow money to pay salary. Don't allow to borrow money to share. You can't do that. The law doesn't allow that.

[00:27:31]for one's cost benefit analysis done and it has not been done and then you also have the law saying any borrowing warning development for analysis any borrowing outside this framework of of the F 2007 is unlawful and I've made made this clear many times many times to world bank and I think they came back to recognize that hey government you can borrow more you can do more for social inclusion but use your internet generated revenue All right prof. >> Well, Prof. finally before I I I let you go, Prof. the tax reform agenda was something that we also, you know, talked about so many times and many said, "Oh, welcome development. You also identified that also in some of your submissions uh earlier in this um uh conversation."

[00:28:23]Also some would talk very much about the student loans where students are able to get loans to go to school and all of that. How would you assess uh uh youth focused initiatives of the administration digital space and all of that? Let's wrap up on that note. What more can be done to strengthen uh uh you know across that that that area?

[00:28:48]You see if you if the best thing to do is to borrow as much as possible to give as loan to students because for two reasons one education skills that [snorts] the most critical investment area for us to develop look at how much India has done and I don't know how much time I could have just given you some of the examples some highlights of where in okay Japan I want you to tell me which mineral resources Japan But Japan became the fourth largest threat to fourth largest power economic power just by investment in in human capacity electronics car manufacturer all of that Japan South Korea is nothing they don't have anything if you invest in human resource you make many many times more dividend imagine if you borrow money if you go to borrow money at 2% 3% consionary loan for 20 years and they invest in manpower. After 15 years, this graduate begins to give you a return that is about 20 to 25%. But you borrow the money at 2% or even 1% or 3%. Don't you see that it's profitable and then those people are the ones in the diaspora sending you 26 billion more than your annual income in the country. So you can't quantify that and you having them fly away because they are needed elsewhere. But even if they sending money but you must also make sure the the education of some sub quality. So it is a place that I love what they are doing and they should do more. It's not enough to say three or 500 puts into that education so that no child is going to be left behind. Let's get it there and then you can see many people quality will go up and people will start coming into Nigeria to come and study. So that is that is one. Then of course you mentioned health. We we've had tremendous progress in health in service. Look at World Bank giving us $ 1.57 billion dollars to ensure that we can improve performance public delivery on health services and then you've seen some some new people coming in to reduce tourism and health tourism with the AMC all these new facilities in Abuja. So there are many more investment heading in there and they will be digital economy champion. We are the digital champion for Africa continental free trade. You cannot fault Nigeria's growth profile in the digital economy. The growth rate has been phenomenal and we should do more because that is where you connect with young people. And India started with this when in 1968 they had a deliberate government policy to produce 250,000 people over 10 years in STEM education and computing and all that. And then then they they came on to Nigeria in 194 1974. We have 500,000 India teaching in Nigerian schools. Eventually they had to go back in 1990. No no no no foreign exchange. And then the next what you saw was Bangalore. And then you saw them going to outsourcing and then from outsourcing to digital software. Now they all living in um Silicon Valley now pouring in hundreds of billions of dollars into into India and then opening up that space. So you know we could do more in that space. We we have a good record of tech hubs. We are controlling 40% of tech investment and then ofs fantastic unicoms. Nigeria doing about six out of eight in Africa. So area of great potential. So let the minister do more and he can do more. He wants to train three million people including to 5 million people in digital digital technology. Excellent. So there are things that the governor the president is doing really well and we must commend him because a complete departure from years of stagnation and people are wondering what kind of country and even those people now they can't put their children in schools here. So any other area that we can talk about I think he has to do something on rail. I tell you what I wrote a bid for Cmech Chinese company for eastern railway corridor when roti was the minister there and when I did that bid I also did a development plan that showed that that eastern corridor will generate $1 trillion economy by in the next 10 years if it was implemented. But what happened they they couldn't find money all kind of things I don't want to go into that missed opportunity >> honestly it's a missed opportunity you know if you connect up our country but is the cheapest way to move heavy goods along long distances and you can see the profit on day one not you don't have to wait for 5 years you will see the profit >> of investing in rail rail transport >> so >> that's for thought >> prof I must thank you so much uh for joining us on the program today.

[00:33:41]Professor Kenny F, development economist. Interesting conversation uh with you today and again let me wish you a happy uh democracy day >> and more democracy in my pocket. Thank you.

[00:33:53]>> Yes. Yes. So thank you so much Prof. Do enjoy the rest of your day. We appreciate you. Thank you Prof. >> Thank you very much.

[00:33:59]>> All right then. Well, let let's take another