From lifting 100 million Nigerians out of poverty to turning Nigeria into a trillion-dollar economy, President Bola Tinubu has declared several ambitious plans since he assumed office. However, his first 77 days in office have been difficult. Nigeria has slipped into a dire cost-of-living crisis on the back of his removing fuel subsidies and a naira float he endorsed.

Many have described these rigid policies as “bitter pills” that will heal Nigeria’s economy. But so far, the symptoms have only gotten worse.

Nigeria’s headline inflation reached a 17-year-high of 22.79% in June, driven by high energy and food prices. Also, its attempt at unifying exchange rates through a “controlled” float is not working. It has only helped devalue the naira in the official market. As of report time, the dollar was trading between N915/$ and N930/$ at the parallel market, widening its gap with the official rates of N757/$1.

GlaxoSmithKline (GSK), a leading pharmaceutical company, announced its exit from Nigeria. The country’s forex crunch was one of the primary constraints that forced GSK to cease operations. The same forex problems have been eating deep into company earnings in the past few months. So if the plan was to attract investors, these events might spook them.

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The World Bank believes an additional 7.1 million Nigerians will fall into extreme poverty in 2023. And the only way that won’t happen is if the President finds a way to boost consumer spending. The question is, what are his plans?

Curbing an emergency

In July, the Presidency declared a state of emergency on food security. The declaration underscored the severity of the issue and has ignited nationwide conversations about the food crisis, its consequences, and potential solutions.  At the heart of Tinubu’s declaration was the urgent need to reassess Nigeria’s food supply and distribution mechanisms. Afterwards, Tinubu asked lawmakers to approve N500 billion ($638 million) of spending to cushion the impact of removing petrol subsidies. The key measures he announced were:

• N200 billion earmarked for agriculture to support the cultivation of 500,000 hectares (1.2 million acres) of land to produce rice, corn, wheat and cassava,
• The administration will also provide 225,000 tons of fertilizer, seedlings and other farm inputs and release 200,000 tons of grain from its strategic reserve,
• N75 billion of concessional lending to fund 75 manufacturers to “kickstart” growth,
• N125 billion for micro, small and medium-sized enterprises, including N50 billion of conditional grants to 1 million nano businesses, and
• N100 billion to purchase a fleet of 3,000 20-seater buses fueled by natural gas.

Food and energy have been the two biggest drivers of Nigeria’s inflation for years. As of 2019, the Nigerian Bureau of Statistics (NBS) reported that Nigerian households spend 57% of their earnings on food. Four years later, the situation hasn’t improved. Some studies indicate that it has gotten much worse. For example, a report by the University of Georgia showed that poor Nigerians, who represent the majority, spend 85% of their income on food. So there is a direct link between boosting food security and improving consumer spending. The less they spend on food, the more disposable income they have. But it’s unlikely that the listed measures will be enough. First, Nigeria has a culture of slow implementation. Second, food is not the (only) elephant in the room.

Nigerians also spend heavily on energy, directly and indirectly. Its power sector generates only about 5,000 MW of electricity. Meanwhile, Nigerians privately produce at least double as much electricity as they get through large-scale grid suppliers by using generators. Power generation is one of the biggest proofs of Nigeria’s self-organising ability. So even if food prices suddenly drop from an influx of grain, production and processing costs will still be high.

The naira’s steep fall at the forex markets also means the proposed beneficiaries of these proposed loans and grants will have less spending power at the markets than needed. According to MAN, manufacturers import over 48% (on average) of their raw materials. Also, 3000 20-seater buses are a drop in a bucket compared to an estimated population of 200 million. That’s an average of one bus to over 30,000 people.

In the meantime, every indicator points to short-term pain for Nigerians. Will Tinubu’s ‘cure’ be worth it in the long term? Time will tell.