Tinubu now has his cabinet in place
But can he make the economy better than he met it?
On his 85th day in office, President Bola Ahmed Tinubu administered the oaths of office on his ministers. Many viewed the inauguration of his cabinet as a belated exercise. The public expectations on the formation of the cabinet were driven by three factors. One, it took his predecessor nearly six months to form his cabinet after he assumed office on 29 May 2015. Tinubu was expected to act with more alacrity in forming his own cabinet, in contradistinction to the unbusinesslike disposition of President Muhammadu Buhari.
Two, soon after he was declared the winner of the February 2023 presidential election in controversial circumstances, Tinubu declared that he would form a “government of national competence”. This was at once a counter-proposition by him to the formation of a “government of national unity” as the election and its outcome seemed to have further polarised the polity, and a continuation of the flimflam that he is adept at working with technocrats since his governorship of Lagos State between 1999-2007.
Three, right from his inauguration day, President Tinubu had appeared to be acting hastily without the benefit of ministerial advice and with neither a plan nor structure in place for the smooth implementation of the key reforms he had introduced. In his inaugural speech, he declared a summary end to the provision of subsidies on petrol, which had made the product affordable and kept the prices of consumer goods lower than they otherwise would have been. This was followed up by a declarative policy that aimed to unify the divergent foreign exchange rates in the market. As the price of a litre of petrol increased by 213 percent and the naira depreciated by over 70 percent in the official market, the need for improvement in policymaking with the help of a cabinet became quite apparent.
By the end of August, the cabinet had been fully constituted, barring any other nominations or clearance by the Senate for nominees who it didn’t initially confirm. The first sense of disappointment emerged when Tinubu did not assign portfolios to his cabinet nominees for confirmation when he sent the list to the Senate President. This removed a critical yardstick for assessing the technical competence of the nominees for the portfolios that would be later assigned to them. In this regard, Tinubu continued with a legacy of his predecessor that left no salutary impact on the economy.
Some commentators believe that being a ministerial nominee implies the possession of enough administrative competence, which they perceive as the overarching requirement for leading the implementation of government policies and programmes at the ministries and in supervising the parastatals under them. The policymaking functions of ministers are largely overlooked. But it is a half-hearted argument, as the importance of subject-matter, technical expertise was later upheld in the designation of some ministers – including that of finance, health, and the digital economy.
Overall, the list of Tinubu’s ministers failed to broadly inspire. The enthusiasm in the nominations of a handful of respected technocrats, and nominees that are both young and perceived to be competent, was dampened by the overload of former state governors, other uninspiring career politicians, poor gender representation (women constitute less than 20 percent of the cabinet), bloating of the cabinet (47 members), under-representation of the South East (with 5 ministers), and a perceived geographical bias in the allocation of “important” or “juicy” portfolios.
Obviously, it is a partisan cabinet at a time the country needs ministers that, together, would reflect the need for national cohesion and capacity to inspire socioeconomic renaissance. At its inauguration, the cabinet failed to raise the mood of the nation, having as members some polarising figures.
But it could have been worse. Tinubu saved his administration from heightened civic antagonism by excluding potential ministerial nominees, including the former Kaduna State governor, Mallam Nasir El Rufai, and Bayo Onanuga. The presence of a rambunctious personality like the former Rivers State governor, Nyesom Wike, should be enough worry for the administration. In this regard, the Senate should be credited for using security report to deny confirmation to some of the ministerial nominees. It showed that the Senate can do the right thing – on some occasions and with some motivations.
Going by their professional profiles, two ministers stand out in the cabinet. As if to confirm the notion of their being first among equals, their portfolios include “coordinating” roles. They are Wale Edun, who is the Minister of Finance and Coordinating Minister of the Economy; and Prof. Muhammad Ali Pate, Coordinating Minister of Health and Social Welfare. Edun is an economist and a leading light in Nigeria’s investment banking; his highly successful career had spanned over three decades. Pate is one of the world’s foremost experts in public health and has led the global health practice of the World Bank after his work as Chief Executive, National Primary Health Care Development Agency, laid the foundation for the eventual elimination of the polio epidemic in Nigeria.
Of the duo, however, Edun faces more daunting challenges on his way to probable success as minister. He cannot manage the national treasury better than the President would want him to. Neither can he help increase the revenue profile of the government more than the prices of oil in the international market, domestic production volumes, and overall productivity of the economy would permit. While he is expected to bring his considerable expertise to bear on the management of government debt, including raising new debts in the international capital market, the country faces both political and macroeconomic headwinds as well as already-high debt level.
As for Dr. Pate, he has the knowledge and the experience to design programmes that will bring noticeable improvements in the country’s population health - a term that refers to the health outcomes of a group of individuals, including the distribution of such outcomes within the group. What to watch out for is the scale of the impact he will make, which may be directly related to budgetary allocation to health. In 2020, during the COVID-19 pandemic, Nigeria’s health expenditure as a percentage of GDP was 3.3 percent. The world’s average was 10.89 percent and the average for Sub-Saharan Africa was 4.92 percent.
The Minister of Communications, Innovation and Digital Economy, Bosun Tijani, is viewed as a “promising minister”. Young and savvy, Dr. Tijani is a bridge between the administration and a sizeable population of young people in the country who have refused to connect with the Tinubu’s presidency. Amongst the relatively young and accomplished members of the cabinet, the minister stands out as a round peg in a round hole. His professional work as Co-Founder and CEO of Co-creation Hub (CcHUB), iHUB, Truppr, and STEM Café demonstrates his knowledge and savvy.
Dr. Tijani is likely to be able to coalesce the digital economy growth aspirations of the government with the energy, creativity, innovation, and hunger for success among Nigeria’s army of young people at home and in the diaspora operating in the tech space. The ongoing digital transition suggests the minister will be superintending a vibrant sector. As a notable operator – working with young innovators – Dr. Tijani should bring problem-solving and opportunity-creating experience to the governance of the country’s innovation economy.
Also important, his membership of the cabinet could instil a sense of tolerance for public criticism, in an administration that will surely continue to get its fair share of public/partisan disapproval. Despite having vented against the situation in the country under the ruling party, he nevertheless is now assigned a portfolio for which his skills and connections are needed. Criticism of government’s failures has never been the same thing as lack of patriotism or unwillingness to serve one’s country.
The hype is that President Tinubu wants to achieve something great through the Minister of Marine and Blue Economy, Bunmi Tunji; Minister of Solid Minerals Development, Dele Alake; Minister of State, Gas Resources, Ekperikpe Ekpo; Minister of State, Petroleum Resources, Heineken Lokpobiri; and probably through himself as Minister of Petroleum Resources. This is based on his self-appointment; appointment of his long-term, trusted associate; fashioning the new portfolios; and renaming the pre-existing ones to suggest their new, higher level of importance. But the appointments could be mundane, prioritising appearance over substance, or worse. Only time will tell.
The rest of the cabinet members are “experienced” politicians, individuals who are appointed as “administrators” – a euphemism for putting square pegs in round holes – and those with questionable pedigrees. Many of them have reputations that, instead of attracting disapproval, have seen them appointed into the officialdom. They indicate a government that is making political calculations than the other priorities it should have.
The Nigerian economy is off the track of progress. Rising from $59.37 billion in 1999 (the beginning of the Fourth Republic), the GDP reached $574.18 billion in 2014, according to data by the World Bank. The upward trajectory of the total economic output fuelled the ambition to make Nigeria one of the top 20 economies in the world by year 2020, as per Nigeria Vision 20 2020. The GDP was projected to reach $1 trillion. But, alas, the GDP plunged to $375.75 billion in 2017 and only rose to $477.39 billion in 2022.
Nigeria’s macroeconomic conditions at the inauguration of the Tinubu administration were roundly negative. Headline inflation rose to 22.22 percent in April 2023. Unemployment rate was at 33.3 percent, and the national poverty rate was at 40.1 percent. The ability of the predecessor of President Tinubu to effectively address the economic slide was affected by low public revenue (which was more of an effect than a cause), high debt service obligation (that reached 0ver 90 percent of government’s actual revenue), and lack of fiscal discipline and accountability. Two episodes of global economic shocks, the first induced by oil price slump in 2016 and the second which was caused by the COVID-19 pandemic in 2020, severely impacted the economy – causing more millions of Nigerians to fall below the poverty line.
Nevertheless, some major infrastructure projects were in recent years completed in the rail sector and many arterial roads – including the Lagos-Ibadan Expressway and the 2nd Niger Bridge – advanced in their construction or reconstruction. More accent on domestic food production saw an increase in the local production of rice. But insecurity and high inflation constrained the overall economic output growth, with many products priced beyond the means of many Nigerians.
The social sector completed the near collapse of the economy through acute underinvestment in education and healthcare. The socioeconomic morass, and welcoming immigration policies of some Western countries, sparked a new wave of emigration of young people and experienced professionals from the country. With no leadership to provide and drive an economic vision of progress, the pool of available energy and skills to support economic growth began to dwindle. And the high level of corruption in the government that was first elected on the promise to fight graft, only left many citizens disoriented.
A challenging rebuilding
Rebuilding the economy is nothing but an arduous challenge. Only now is the level of financial mismanagement of the last eight years beginning to emerge. Contrary to the impression that was created by the Central Bank of Nigeria (CBN) that its total foreign reserves value was at $34.91 billion at the end of April 2023, a report by JP Morgan last month showed that the net external reserves totalled at $3.7 billion. CBN’s audited 2022 financial statements released earlier in August had put its net reserves position at $17 billion at the end of last year.
While these troubling figures have continued to fly around, there has been no substantive governor of the central bank. While it is unlikely that Godwin Emefiele, who was suspended as the governor of the reserve bank and is awaiting trial for various charges for his actions while in office, would return to his position, he enjoys tenure security, on account of the CBN Act 2007. Except a two-thirds majority of the Senate votes to remove him, the absence of a substantive leadership at the apex bank can drag on till early June 2024 when Emefiele’s tenure would statutorily expire.
Meanwhile, the country is experiencing a spell of price and financial instability. A $3 billion loan from Afreximbank to the country in mid-August caused a reversal of the continued depreciation in the value of the naira. After one week, this effect had seemingly worn off as the value of the naira started to fall again, with the exchange rate rising to N920/$1 on August 25.
In the short term, the succour for the naira seems to rely on an improbable significant increase in oil prices or a boost to Nigeria’s production volume, which averaged 1.24 million barrels per day (mbpd) in June – just 71.2 percent of the country’s 1.74mbpd quota allocation by OPEC+. The slump in Nigeria’s oil production follows insecurity in the Niger Delta where oil theft rose to unprecedented very high levels in recent years.
President Tinubu assigned himself the responsibility of reviving the oil sector as Minister of Petroleum Resources. A similar self-assignment of this portfolio by President Buhari was supposed to strengthen his grip on the nation’s foremost revenue-earning resource sector for good purposes. But as it turned out, combining the portfolio with the vast responsibilities of the president didn’t augur well for the oil sector and the economy. The sabotage and massive purloining of the country’s oil production occurred in spite of Buhari’s experience as a retired army general.
Tinubu may bring more pragmatism to curbing oil theft. His approach, which unfolds as likely to strengthen the role of former rogue, non-state actors in the oil-rich Niger Delta, is set to depart from the opposite strategy by the late President Umaru Yar’Adua, who introduced an amnesty programme to strengthen the government’s role in securing oil installations in the region. The Minister of Defence, Bello Matawalle, former governor of Zamfara State, brings to his portfolio an experience of insecurity but lack of effective response to curb it. Addressing insecurity in the country is also critical for raising output in the agriculture sector. The contribution of the sector, which employs over 70 percent of the labour force, to nominal GDP fell to 19.63 percent in Q1 2023.
A robust growth in the industrial sectors will depend on reversing adverse macroeconomic conditions. However, the ministers that have been assigned to the relevant supervising ministries, though may have impressive profiles, seem to lack experience in the relevant industries. One of the enablers of industrial growth is power. The Minister of Power, Adebayo Adelabu, a former deputy governor of the CBN, has a considerable experience in commercial banking. His expertise will support project finance in the areas of public participation in power projects. But for the federal government, that scope of involvement is currently limited to power transmission. Private entities in 2013 acquired the public assets in power generation and distribution. But with many of the entities now in financial distress, public sector intervention may not be ruled out.
Similarly, Dele Alake, the Minister of Solid Minerals Development, is a journalist (who did not specialise on the economy) and a politician. The Minister of Aviation and Aerospace Development, Festus Keyamo, SAN, is a senior lawyer and politician with no experience in successful policymaking. He seemed to suggest that he was ineffective as a Minister of State for Labour and Employment, under Buhari, because the position of Minister of State – which he said is unconstitutional – entail that the “junior” minister must seek clearance from his/her “senior” minister on any initiative.
These ministers and others will hopefully outperform rational expectations. Nigerians and the country need such surprise on the upside.
With the cabinet now in place, the administration should strive to first return the economy to stability. This involves stabilising the price of petrol and the availability of the product, general price level (or inflation rate), and the exchange rate. However, this does not suggest a return to the price levels on May 29. Should the administration maintain price stability in the short term, that should count for success, especially as it can build on it by harnessing the potential investment benefits of its ideological shift.
Success with the provision of palliatives to the poor and vulnerable citizens is also achievable, but it will require discipline, honesty, and data transparency. Data transparency in the disbursement and the impact of the programme would be a welcome development.
These constitute a low bar. It doesn’t require the administration to return key economic indicators it had negatively impacted to the level they were at the end of the last administration. The genie is out of the bottle with regard to the naira exchange rate, prices of petrol, and in the short-term an increase in poverty, which should not grow to meet the World Bank’s worst-case scenario of an additional 7.1 million people falling below the poverty in the absence of the provision of effective palliatives to cushion the effect of petrol price increases. Nevertheless, it would require considerable efforts to stabilise the economy.
Jide Akintunde is Managing Editor, Financial Nigeria, and Director, Nigeria Development and Finance Forum.
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